When the total income of an economy is $1,000, the consumption spending is $800. If the total income increases to $1,500, then consumption spending increases to $1,100. The marginal propensity to consume for the economy is:

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Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. Here, the change in consumption is $1,100 - $800 = $300, and the change in income is $1,500 - $1,000 = $500. Therefore, MPC = $300 / $500 = 0.6.

When the Total Income of an Economy Is $1,000, the Consumption