-Refer to Exhibit 10-8.The marginal propensity to consume (MPC)is
A) 0.90.
B) 0.10.
C) 0.80.
D) 0.95.
E) 0.75.

Question

-Refer to Exhibit 10-8.The marginal propensity to consume (MPC)is
A) 0.90. 
B) 0.10. 
C) 0.80. 
D) 0.95. 
E) 0.75.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in income. Without specific numbers from Exhibit 10-8, the general formula is MPC = ΔC/ΔY. An MPC of 0.80 means that for every additional dollar of income, consumption increases by 80 cents.