The nation has its own MPC. When national 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 MPC (Marginal Propensity to Consume) is the ratio of the change in consumption to the change in income. Using the given information:

MPC = (Change in consumption) / (Change in income)

MPC = ($360 billion - $300 billion) / ($400 billion - $300 billion)

MPC = $60 billion / $100 billion

MPC = 0.6

Therefore, the answer is choice C, 0.6.

The Nation Has Its Own MPC