If disposable income increases by $100 and consumption increased by $85,ceteris paribus,we may conclude that
A)the marginal propensity to consume is 0.85.
B)the marginal propensity to consume is 0.15.
C)$15 is autonomous consumption.
D)a change in disposable income is induced by a change in consumption.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the fraction of each additional dollar of disposable income that is spent on consumption. Here, we see that consumption increased by $85 when disposable income increased by $100. Therefore, the MPC is 85/100, or 0.85.

If Disposable Income Increases by $100 and Consumption Increased by $85,ceteris