If the marginal propensity to consume is 0.8, then $80 of every additional $100 of income will be spent on consumption.

Question

Quizplus · Accepted Answer

The definition of marginal propensity to consume (MPC) is the fraction of any additional income that is spent on consumption. An MPC of 0.8 means that for every additional $100 of income, $80 will be spent on consumption (and $20 will be saved or used for other purposes). Therefore, statement A is true.

If the Marginal Propensity to Consume Is 0