Scenario 34-1.Take the following information as given for a small,imaginary economy:
• When income is $10,000,consumption spending is $6,500.
• When income is $11,000,consumption spending is $7,300.
-Refer to Scenario 34-1.The marginal propensity to consume for this economy is

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. Here, the change in consumption is $800 ($7,300 - $6,500) and the change in income is $1,000 ($11,000 - $10,000). Thus, MPC = $800 / $1,000 = 0.800.