The nation's disposable income increases by $400 billion and, as a result, consumer spending increases by $320 billion.Therefore, the MPC equals
A)0.16.
B)0.20.
C)0.60.
D)0.80.
E)0.96.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) is calculated by dividing the change in consumer spending by the change in disposable income. Here, MPC = $320 billion / $400 billion = 0.8.

The Nation's Disposable Income Increases by $400 Billion And, as a Result