$$\begin{array} { | l | l | }
\hline \begin{array} { l }
\text { Disposable income } \
\text { (billions of dollars) }
\end{array} & \begin{array} { l }
\text { Consumption } \
\text { exp enditure } \
\text { (billions of dollars) }
\end{array} \
\hline 400 & 450 \
\hline 600 & 600 \
\hline 800 & 750 \
\hline 1000 & 900 \
\hline 1200 & 1050 \
\hline
\end{array}$$
-Based upon the above table, the MPC for the consumption function is
A) constant at 0.75.
B) increasing as income rises.
C) constant at 0.25.
D) equal to 1.0 at $600 billion.

Question

$$\begin{array} { | l | l | } 
\hline \begin{array} { l } 
\text { Disposable income } \
\text { (billions of dollars) }
\end{array} & \begin{array} { l } 
\text { Consumption } \
\text { exp enditure } \
\text { (billions of dollars) }
\end{array} \
\hline 400 & 450 \
\hline 600 & 600 \
\hline 800 & 750 \
\hline 1000 & 900 \
\hline 1200 & 1050 \
\hline
\end{array}$$
-Based upon the above table, the MPC for the consumption function is
A) constant at 0.75.
B) increasing as income rises.
C) constant at 0.25.
D) equal to 1.0 at $600 billion.

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) is calculated as the change in consumption divided by the change in disposable income. Here, for each $200 billion increase in income, consumption increases by $150 billion, so MPC = 150/200 = 0.75, which is constant.

-Based Upon the Above Table, the MPC for the Consumption