If the MPC is 0.5,then a $10 million increase in disposable income will increase consumption by
A)$2 million.
B)$5 million.
C)$15 million
D)$50 million.

Question

Quizplus · Accepted Answer

The MPC (Marginal Propensity to Consume) represents the proportion of each additional dollar of disposable income that is spent on consumption. Therefore, if the MPC is 0.5, this means that $0.50 out of each additional dollar will be spent on consumption.

So, a $10 million increase in disposable income will result in $10 million x 0.5 = $5 million increase in consumption. Therefore, the correct choice is B) $5 million.

If the MPC Is 0