Suppose Chen receives a promotion that earns him an additional $20,000 per year. If the MPC is 0.9, how much of the additional $20,000 that Chen earns will be spent?
A) $20,000
B) $2,500
C) $17,500
D) $18,000

Question

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) is the proportion of additional income that an individual will spend. If Chen's MPC is 0.9, it means he will spend 90% of any additional income. Therefore, 90% of $20,000 is $18,000.

Suppose Chen Receives a Promotion That Earns Him an Additional