Which of the following describes marginal propensity to consume (MPC)and average propensity to consume (APC)?
A)MPC is less than 1, but APC can be either greater or less than 1.
B)Both MPC and APC are always less than 1.
C)MPC is less than 1, but APC is always equal to 1.
D)MPC and APC are always greater than or equal to 1.

Question

Quizplus · Accepted Answer

MPC is the proportion of an increase in income that is spent on consumption, and it is always less than 1 since households typically save a portion of their income. On the other hand, APC is the overall proportion of income that is spent on consumption, and it can be either greater or less than 1 depending on the level of consumption relative to income. Therefore, option A correctly describes both MPC and APC.

Which of the Following Describes Marginal Propensity to Consume (MPC)and