The fraction of a change in disposable income that is spent on consumption is the
A) marginal propensity to consume.
B) marginal buying power of money.
C) expected future disposable income.
D) marginal dissaving ratio.
E) marginal propensity to dissave.

Question

Quizplus · Accepted Answer

The definition given in the question matches perfectly with the concept of marginal propensity to consume (MPC), which measures the change in consumption as a result of a change in disposable income. MPC can be calculated as the ratio of the change in consumption to the change in disposable income.

The Fraction of a Change in Disposable Income That Is