If income in Austria decreases by 30 million euros and consumption decreases by 24 euros, then the MPC equals
A)0.90.
B)0.80.
C)0.60.
D)−0.60.

Question

Quizplus · Accepted Answer

MPC (marginal propensity to consume) can be calculated as the change in consumption divided by the change in income.

MPC = ΔC/ΔY

Here, income has decreased by 30 million euros and consumption has decreased by 24 million euros.

Therefore, MPC = (-24 million euros) / (-30 million euros) = 0.8

Hence, the correct answer is B) 0.80.

If Income in Austria Decreases by 30 Million Euros and Consumption