If your disposable income increases from $30,000 to $35,000 and your consumption increases from $11,000 to $12,000, your marginal propensity to consume (MPC) is:
A) 0.2.
B) 0.4.
C) 0.5.
D) 0.8.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by the change in consumption divided by the change in disposable income. Here, the change in consumption is $1,000 ($12,000 - $11,000) and the change in disposable income is $5,000 ($35,000 - $30,000). Therefore, MPC = $1,000 / $5,000 = 0.2.

If Your Disposable Income Increases from $30,000 to $35,000 and Your