Exhibit 10-4

-The MPC in the economy represented in Exhibit 10-4 is
A)0
B)0.2
C)0.8
D)0.9
E)80

Question

Exhibit 10-4
 
-The MPC in the economy represented in Exhibit 10-4 is
A)0 
B)0.2 
C)0.8 
D)0.9 
E)80

Quizplus · Accepted Answer

The MPC (Marginal Propensity to Consume) is the fraction of extra income that households would spend rather than save. It is calculated as the change in consumption divided by the change in income. In this case, when disposable income increases by 10 units, consumption spending increases by 8 units. Therefore, the MPC for this economy is 8/10 or 0.8.

Exhibit 10-4 -The MPC in the Economy Represented in Exhibit 10-4 Is