How do economists define the marginal propensity to consume (MPC)?
A)as the fraction of total disposable income that households save
B)as the fraction of total disposable income that households spend on consumption
C)as the additional disposable income households earn in a given period
D)as the additional consumption that results from one dollar increase in disposable income

Question

Quizplus · Accepted Answer

Economists define MPC as the additional consumption that results from one dollar increase in disposable income. In other words, it represents the fraction of additional income that households spend on consumption. Therefore, option D is the correct definition of MPC.

How Do Economists Define the Marginal Propensity to Consume (MPC)