If your real disposable income goes up by $1,000 per week, and your real consumption spending goes up by $800 per week, you have a marginal propensity to consume of
A)0.2.
B)0.8.
C)1.2.
D)1.0.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the ratio of the change in consumption to the change in disposable income:

MPC = Change in consumption / Change in disposable income

In this case, the change in disposable income is $1,000 and the change in consumption is $800, so:

MPC = 800 / 1000 = 0.8

Therefore, the answer is B.

If Your Real Disposable Income Goes Up by $1,000 Per