If the overall income in an economy increases by $2,000 and consumption spending increases by $1,600 as a result, then the marginal propensity to consume for the economy is:
A) 0.2.
B) 0.4.
C) 0.6.
D) 0.8.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by dividing the change in consumption by the change in income, which in this case is $1,600 / $2,000 = 0.8.

If the Overall Income in an Economy Increases by $2,000