The nation has its own MPC. When disposable income increases from $300 billion to $400 billion, national consumption increases from $300 billion to $360 billion. At Y = $400 billion, the MPC is:
A)0.2.
B)0.5.
C)0.6.
D)0.67.
E)1.33.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) is calculated as the change in consumption divided by the change in disposable income. Here, the change in consumption is $60 billion ($360 billion - $300 billion) and the change in disposable income is $100 billion ($400 billion - $300 billion). Therefore, MPC = $60 billion / $100 billion = 0.6.

The Nation Has Its Own MPC