What are induced consumption and the marginal propensity to consume,respectively?
A)The amount of income that results from higher levels of consumption and the change in income divided by the change in consumption.
B)The amount of consumption that results from higher levels of income and the change in consumption divided by the change in income.
C)The amount of consumption that occurs at zero income and the change in consumption divided by the change in income.
D)The amount of consumption that occurs at zero income and the change in income divided by the change in consumption.

Question

Quizplus · Accepted Answer

Induced consumption refers to the additional consumption that occurs as a result of an increase in income, while the marginal propensity to consume (MPC) refers to the fraction of each additional dollar of income that is spent on consumption. Therefore, option B accurately defines both concepts. Options A and D are incorrect because induced consumption does not refer to the amount of income resulting from higher levels of consumption and the change in income divided by the change in consumption. Option C is incorrect because it refers to the amount of consumption that occurs at zero income, which is not related to either induced consumption or the MPC.

What Are Induced Consumption and the Marginal Propensity to Consume,respectively