-In the above table, there are no taxes (so that that real GDP equals disposable income)and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is
A) -750.
B) -0.75.
C) 0.75.
D) 0.80.

Question

-In the above table, there are no taxes (so that that real GDP equals disposable income)and no imports or exports. If real GDP decreases from $6,000 to $5,000, the marginal propensity to consume is
A) -750. 
B) -0.75. 
C) 0.75. 
D) 0.80.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. If real GDP decreases from $6,000 to $5,000, the MPC is the ratio of the change in consumption to the change in GDP, which is typically a positive value less than 1. In this context, 0.75 is a plausible MPC value.

-In the Above Table, There Are No Taxes (So That