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

Question

Quizplus · Accepted Answer

A lower marginal propensity to consume (MPC) means that a smaller portion of additional income is spent on consumption, leading to a smaller effect on aggregate demand. An MPC of 0.2 is the lowest among the options, resulting in the smallest change in aggregate demand.

With Which of the Following Marginal Propensities to Consume Would