The short-run marginal propensity to consume is estimated on the basis of
A) a straight-line equation that most accurately describes consumption as a function of personal disposable income.
B) a curved-line equation that most accurately describes consumption as a function of personal disposable income.
C) a straight-line equation that most accurately describes year-to-year changes in consumption as a function of year-to-year changes in personal disposable income.
D) a curved-line equation that most accurately describes year-to-year changes in consumption as a function of year-to-year changes in personal disposable income.
E) none of the above.

Question

Quizplus · Accepted Answer

The short-run marginal propensity to consume is estimated based on a straight-line equation that most accurately describes year-to-year changes in consumption as a function of year-to-year changes in personal disposable income. This approach captures the immediate response of consumption to changes in income.

The Short-Run Marginal Propensity to Consume Is Estimated on the Basis