The change in disposable income is $200 and the change in saving is $50.What is the marginal propensity to consume (MPC)?
A) 0.25
B) 0.50
C) 0.66
D) 0.75
E) There is not enough information to answer the question.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in disposable income. If the change in saving is $50, then the change in consumption is $150 (since the change in disposable income is $200 and what is not saved is consumed). Therefore, MPC = $150 / $200 = 0.75.

The Change in Disposable Income Is $200 and the Change