If Rhonda's taxes rose by $20 000,other things being equal,which of the following statements about her consumption is accurate?
A)It would fall by $15 000 if her MPC was equal to 0.75.
B)It would fall by $15 000 if her APC was equal to 0.75.
C)It would rise by $15 000 if her APC was equal to 0.75.
D)It would rise by $15 000 if her MPC was equal to 0.75.

Question

Quizplus · Accepted Answer

The MPC (marginal propensity to consume) is the proportion of additional income that a household spends on consumption. If Rhonda's taxes rose by $20,000, her disposable income would fall by $20,000. If her MPC is 0.75, it means that she would spend 75% of this reduction in disposable income, which is $15,000. Therefore, her consumption would fall by $15,000.

If Rhonda's Taxes Rose by $20 000,other Things Being Equal,which