Consider the following data. What is the marginal propensity to consume?
$$\begin{array} { | c | c | }
\hline \begin{array} { c }
\text { Consumption } \
\text { (trillions of \$) }
\end{array} & \begin{array} { c }
\text { Income } \
\text { (trillions of \$) }
\end{array} \
\hline 1.7 & 2 \
\hline 2.3 & 3 \
\hline 2.9 & 4 \
\hline
\end{array}$$
A)1.67
B)0.6
C)0.75
D)0.4

Question

Consider the following data. What is the marginal propensity to consume?
$$\begin{array} { | c | c | } 
\hline \begin{array} { c } 
\text { Consumption } \
\text { (trillions of \$) }
\end{array} & \begin{array} { c } 
\text { Income } \
\text { (trillions of \$) }
\end{array} \
\hline 1.7 & 2 \
\hline 2.3 & 3 \
\hline 2.9 & 4 \
\hline
\end{array}$$
A)1.67
B)0.6
C)0.75
D)0.4

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. From the table, the change in consumption when income increases from 2 to 3 trillion dollars is 0.6 trillion dollars (2.3 - 1.7), and the change in income is 1 trillion dollars (3 - 2). Therefore, MPC = 0.6 / 1 = 0.6.

Consider the Following Data A)167 B)0

Consider the Following Data A)167
B)0