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.

Question

Quizplus · Accepted Answer

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

The Nation Has Its Own MPC