Exhibit 10-7

-In Exhibit 10-7,the marginal propensity to consume is
A) 0.3
B) 0.1
C) 0.7
D) 0.4
E) 0.2

Question

Exhibit 10-7
 
-In Exhibit 10-7,the marginal propensity to consume is
A) 0.3 
B) 0.1 
C) 0.7 
D) 0.4 
E) 0.2

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by dividing the change in consumption by the change in income. Looking at Exhibit 10-7, we can see that when income increases from $500 to $600, consumption increases from $650 to $720. This means that the change in consumption is $70 and the change in income is $100. Dividing $70 by $100 gives us an MPC of 0.7. Therefore, the correct answer is C.

Exhibit 10-7 -In Exhibit 10-7,the Marginal Propensity to Consume Is