The marginal propensity to consume is the increase in consumer spending when disposable income increases by $1.

Question

Quizplus · Accepted Answer

The definition of marginal propensity to consume (MPC) is correct. It measures the change in consumption expenditure resulting from a change in disposable income. Specifically, it is the ratio of change in consumption to change in disposable income. Therefore, when disposable income increases by $1, the MPC represents the portion of that increase that consumers will spend on goods and services, rather than save.

The Marginal Propensity to Consume Is the Increase in Consumer