Jack Nelson, a supervisor in the hardware department at Sears, received a $3,000 increase in his annual disposable income.Suppose his marginal propensity to consume is 0.80.How much of the $3,000 increase will Jack spend on consumption?
A) $2,750
B) $2,500
C) $2,400
D) $2,200
E) $3,000.

Question

Quizplus · Accepted Answer

Jack's marginal propensity to consume (MPC) is 0.80, meaning he will spend 80% of any additional income. Therefore, he will spend 0.80 * $3,000 = $2,400 on consumption.

Jack Nelson, a Supervisor in the Hardware Department at Sears