The fraction of each added dollar of income that is used for consumption is called the:

Question

Quizplus · Accepted Answer

The definition given in the question corresponds to the concept of marginal propensity to consume (MPC). The MPC measures the fraction of each additional dollar of income that is spent on consumption. Therefore, option D is the correct answer. Option A (average propensity to consume) is the ratio of total consumption to total income, while option B (autonomous consumption rate) refers to the minimum level of consumption expenditure that occurs even when income is zero. Option C (marginal consumption propensity) is not a commonly used term in economics.

The Fraction of Each Added Dollar of Income That Is