When disposable income is $8 trillion, consumption expenditure is $5 trillion; when disposable income is $5 trillion, consumption expenditure is $3 trillion. The MPC is
A) (5 + 3) ÷ (8 + 5) = 0.615.
B) (5 - 3) ÷ (8 - 5) = 0.667.
C) (5 + 3) ÷ (8 - 5) = 2.667.
D) (5/8 + 3/5) = 1.225.
E) (8 - 5) ÷ (5 - 3) = 1.333.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) is calculated as the change in consumption expenditure divided by the change in disposable income, which is (5 - 3) ÷ (8 - 5) = 0.667.

When Disposable Income Is $8 Trillion, Consumption Expenditure Is $5