With which of the following marginal propensities to consume would a given change in disposable income have the greatest effect on aggregate demand?
A)0.2
B)0.4
C)0.6
D)0.8

Question

Quizplus · Accepted Answer

The higher the marginal propensity to consume, the greater the effect a change in disposable income will have on aggregate demand. A marginal propensity to consume of 0.8 means that for every additional dollar of disposable income, 80 cents will be spent on consumption, leading to a greater increase in aggregate demand.

With Which of the Following Marginal Propensities to Consume Would