If the average marginal propensity to consume is 0.68, then a $1 trillion increase in total income will lead to a _____ in consumption.
A)$3.2 trillion decrease
B)$3.2 trillion increase
C)$6.8 trillion increase
D)$0.68 trillion increase

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the proportion of an increase in income that gets spent on consumption. If the MPC is 0.68, then for every $1 increase in income, consumption increases by $0.68. Therefore, a $1 trillion increase in income would lead to a $0.68 trillion increase in consumption.

If the Average Marginal Propensity to Consume Is 0