The table given below reports the value of real GDP and its components consumption (C), investment (I), exports, and imports for two consecutive years. Table 10.3
Consider Table 10.3 to calculate the value of the MPC.

Question

The table given below reports the value of real GDP and its components consumption (C), investment (I), exports, and imports for two consecutive years. Table 10.3
 Consider Table 10.3 to calculate the value of the MPC.

Quizplus · Accepted Answer

MPC (Marginal Propensity to Consume) is the increase in consumption expenditure due to an increase in disposable income. It can be calculated as the change in consumption divided by the change in income.

Using the data from Table 10.3, we can calculate the change in consumption (ΔC) and the change in income (ΔY) between the two years:

ΔC = C2020 - C2019 = 3500 - 3000 = 500

ΔY = Y2020 - Y2019 = 12,000 - 9000 = 3000

MPC = ΔC / ΔY = 500 / 3000 = 0.67

Therefore, the best choice is B, with an MPC value of 0.67.

The Table Given Below Reports the Value of Real GDP