It has been estimated that the marginal propensity to consume out of tax rebate money is less than one-third.

Question

Quizplus · Accepted Answer

This statement is true. The marginal propensity to consume (MPC) refers to the portion of any additional income that is spent on consumption. Studies have shown that when people receive tax rebates, they tend to save or pay off debt with a significant portion of the money, rather than spending it immediately. Therefore, the MPC out of tax rebate money is generally less than one, and possibly less than one-third.

It Has Been Estimated That the Marginal Propensity to Consume