If Trent's MPC is 0.80, this means that he will
A) spend eight-tenths of any increase in his disposable income.
B) spend eight-tenths of any level of disposable income.
C) break even when his disposable income is $8,000.
D) save two-tenths of any level of disposable income.

Question

Quizplus · Accepted Answer

An MPC (Marginal Propensity to Consume) of 0.80 means that for every extra dollar of disposable income Trent receives, he will spend 80 cents of it. Therefore, if there is an increase in his disposable income, he will spend eight-tenths (80%) of it. Choice A accurately reflects this definition.

If Trent's MPC Is 0