Between 2015 and 2016 the government reported that disposable income decreased by $400 billion. If the MPC equals 0.8, then consumption expenditure

Question

Quizplus · Accepted Answer

The decrease in consumption expenditure can be calculated using the marginal propensity to consume (MPC). The formula is ΔC = MPC × ΔY, where ΔC is the change in consumption, MPC is the marginal propensity to consume, and ΔY is the change in disposable income. With an MPC of 0.8 and a decrease in disposable income of $400 billion, the decrease in consumption expenditure is 0.8 × $400 billion = $320 billion.

Between 2015 and 2016 the Government Reported That Disposable Income