If income rises from $3,000 per month to $3,500 per month and consumption increases from $2,800 per month to $3,200 per month, what is the marginal propensity to consume?
A) 0.8
B) 0.91
C) 1.09
D) 1.25

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by the change in consumption divided by the change in income. Here, the change in consumption is $3,200 - $2,800 = $400, and the change in income is $3,500 - $3,000 = $500. Therefore, MPC = $400 / $500 = 0.8.

If Income Rises from $3,000 Per Month to $3,500 Per