An MPC value of less than 1.0 indicates that as income increases,
A) consumption also increases, and by more than the increase in income.
B) consumption also increases, and at the same rate as the increase in income.
C) consumption will go in the opposite direction and decrease.
D) consumption also increases, though not as much as income.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) represents the proportion of an additional unit of income that is spent on consumption. An MPC value of less than 1 indicates that when income increases, consumption increases as well, but by a smaller proportion than the increase in income.

An MPC Value of Less Than 1