The ratio of the change in consumption to the change in disposable income is the
A) marginal propensity to consume.
B) marginal propensity to save.
C) average propensity to consume.
D) average propensity to save.

Question

Quizplus · Accepted Answer

The ratio of the change in consumption to the change in disposable income is known as the marginal propensity to consume (MPC), which measures the fraction of each additional dollar of income that is spent on consumption. The MPC can range from 0 to 1, with a higher MPC indicating a greater tendency to consume rather than save.

The Ratio of the Change in Consumption to the Change