In general,the marginal propensity to spend is the change in total desired expenditure induced by a change in ________ whereas the marginal propensity to consume is the change in desired consumption expenditure induced by a change in ________.In the case of the simplest macro model with no government and no international trade,however,the marginal propensity to spend is ________ the marginal propensity to consume.
A)national income; disposable income; greater than
B)national income; disposable income; equal to
C)disposable income; national income; equal to
D)disposable income; national income; greater than
E)national income; disposable income; smaller than

Question

Quizplus · Accepted Answer

In general, the marginal propensity to spend reflects changes in total desired expenditure due to changes in national income, while the marginal propensity to consume reflects changes in desired consumption expenditure due to changes in disposable income. In a simple macroeconomic model without government and international trade, these two propensities are equal because all income is either spent or saved, and there are no taxes or imports to differentiate between national and disposable income.

In General,the Marginal Propensity to Spend Is the Change in Total