A given change in disposable income would have the greatest effect on consumption with which of the following marginal propensities to consume?
A)0.4
B)0.6
C)0.8
D)0.2

Question

A given change in disposable income would have the greatest effect on consumption with which of the following marginal propensities to consume?
A)​0.4
B)​0.6
C)​0.8
D)​0.2

Quizplus · Accepted Answer

The higher the marginal propensity to consume (MPC), the greater the effect a given change in disposable income will have on consumption. An MPC of 0.8 means that for every additional dollar of disposable income, 80 cents will be spent, leading to a higher increase in consumption than with an MPC of 0.4 or 0.2. Therefore, choice C is the best choice.

A Given Change in Disposable Income Would Have the Greatest