The marginal propensity to consume is defined as the
A) fraction of total income not spent on consumption.
B) proportion of any change in income that is spent on consumption.
C) fraction of total income spent on consumption.
D) fraction of a change in income that is saved.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the proportion of any change in income that is spent on consumption. It measures the increase in consumer spending as a result of an increase in disposable income. For example, if a person's disposable income increases by $100 and they spend $80 of that increase on consumption, their MPC is 0.8 ($80/$100).

The Marginal Propensity to Consume Is Defined as the