If income increases from $3,000 per month to $3,500 per month and consumption rises from $2,800 per month to $3,200 per month, what is the marginal propensity to consume?
A) 1.25
B) 0.8
C) 1.09
D) 0.91

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. Here, the change in consumption is $400 ($3,200 - $2,800) and the change in income is $500 ($3,500 - $3,000). Thus, MPC = $400 / $500 = 0.8.

If Income Increases from $3,000 Per Month to $3,500 Per