The smaller the amount saved out of a change in disposable income, the
A)larger the MPC.
B)smaller is autonomous consumption.
C)more net taxes affect consumption.
D)more horizontal the consumption function.
E)smaller the MPC.

Question

Quizplus · Accepted Answer

The smaller the amount saved out of a change in disposable income, the larger the MPC. This is because the MPC is the ratio of the change in consumption to the change in disposable income. If the amount saved is smaller, then the change in consumption will be larger, and therefore the MPC will be larger.

The Smaller the Amount Saved Out of a Change in Disposable