Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC) is
A) 0.25.
B) 0.75.
C) 1.33.
D) 4.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption spending divided by the change in disposable income. Therefore, MPC = $750/$1,000 = 0.75.

Suppose That When Disposable Income Increases by $1,000, Consumption Spending