Exhibit 15-1 Disposable income and consumption data In Exhibit 15-1, when disposable income (Y) is increased from $1,000 to $2,000, the marginal propensity to consume is:

Question

Exhibit 15-1  Disposable income and consumption data  In Exhibit 15-1, when disposable income (Y) is increased from $1,000 to $2,000, the marginal propensity to consume is:

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption (C) divided by the change in disposable income (Y). In this case, when Y is increased from $1,000 to $2,000, consumption is increased from $1,200 to $1,800, which is a change of $600. Therefore, the MPC is 600/1,000, or 0.6.

Exhibit 15-1 Disposable Income and Consumption Data in Exhibit 15-1