Suppose total disposable income in Country X rises by $500 billion while total consumption rises by $50 billion.What would be the slope of the consumption function for this nation?
A)1
B)0.1
C)0.5
D)0.25
E)0.4

Question

Quizplus · Accepted Answer

The slope of the consumption function, also known as the marginal propensity to consume (MPC), is calculated by dividing the change in consumption by the change in disposable income. Here, it is $50 billion / $500 billion = 0.1.

Suppose Total Disposable Income in Country X Rises by $500