$$\begin{array} { c c }
\text { Disposable Income } & \text { Consumption } \
0 & \$ 200 \text { billion } \
\$ 200 \text { billion } & 300 \text { billion } \
400 \text { billion } & 400 \text { billion } \
600 \text { billion } & 500 \text { billion } \
800 \text { billion } & 600 \text { billion }
\end{array}$$
-How much is the marginal propensity to consume when disposable income rises from $600 billion to $800 billion?

Question

$$\begin{array} { c c } 
\text { Disposable Income } & \text { Consumption } \
0 & \$ 200 \text { billion } \
\$ 200 \text { billion } & 300 \text { billion } \
400 \text { billion } & 400 \text { billion } \
600 \text { billion } & 500 \text { billion } \
800 \text { billion } & 600 \text { billion }
\end{array}$$
-How much is the marginal propensity to consume when disposable income rises from $600 billion to $800 billion?

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in disposable income. From $600 billion to $800 billion, consumption rises from $500 billion to $600 billion, a change of $100 billion, while income rises by $200 billion. Thus, MPC = $100 billion / $200 billion = 0.5.

-How Much Is the Marginal Propensity to Consume When Disposable