When disposable income increases, consumption expenditure
A) also increases, but by less.
B) does not change.
C) also increases and by an equal amount.
D) decreases by the same amount.
E) also increases and by more.

Question

Quizplus · Accepted Answer

When disposable income increases, consumption expenditure typically increases, but by a smaller proportion due to the marginal propensity to consume being less than one.

When Disposable Income Increases, Consumption Expenditure