Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his
Annual disposable income. Suppose his marginal propensity to consume is 0.80. How much of the
$3,000 increase will Jack spend on consumption?
A)$2,500
B)$3,000
C)$2,400
D)$2,750
E)$2,200

Question

Quizplus · Accepted Answer

Jack's marginal propensity to consume (MPC) is 0.80, meaning he will spend 80% of any additional income. Therefore, he will spend 0.80 * $3,000 = $2,400 on consumption.

Jack Nelson, a Supervisor in the Hardware Department at Sears