The fraction of additional current income that a person consumes in the current period is known as the
A)consumption-smoothing motive.
B)consumption deficit.
C)saving rate.
D)marginal propensity to consume.

Question

Quizplus · Accepted Answer

The fraction of additional current income that a person consumes in the current period is known as the marginal propensity to consume (MPC). It represents the change in consumption spending for each additional dollar of income received. A higher MPC indicates that individuals are more likely to spend, rather than save, their additional income.

The Fraction of Additional Current Income That a Person Consumes