The marginal propensity to consume is the
A)fraction of the first dollar of disposable income received that is saved.
B)fraction of the first dollar of disposable income received that is consumed.
C)fraction of the last dollar of disposable income received that is saved.
D)fraction of a change in disposable income that is spent on consumption.
E)total amount of consumption divided by the total amount of disposable income.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the fraction of a change in disposable income that is spent on consumption. It represents how much of an increase in income will result in an increase in consumption. For example, if someone's MPC is 0.8, it means that for every extra dollar they receive, they will spend $0.80 and save $0.20.

The Marginal Propensity to Consume Is the