How is the MPC defined?
A)It is the fraction of a change in income which is not spent.
B)It is the fraction of a change in consumption that results from a change in income.
C)It is the fraction of total income which is not consumed.
D)It is the fraction of total income which is consumed.
E)It is the fraction of a change in the level of income that results from a change in consumption.

Question

Quizplus · Accepted Answer

MPC (Marginal Propensity to Consume) is defined as the fraction of a change in consumption that results from a change in income. In other words, if income increases by $1, and the consumption increases by $0.75, then the MPC is 0.75. This indicates how much consumers tend to spend out of each additional dollar of income they receive.

How Is the MPC Defined