The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy. Table 10.4
Calculate the marginal propensity to consume for the economy from the information given in Table 10.4.

Question

The table given below shows the real GDP, aggregate expenditures, saving, and imports of an economy. Table 10.4
 Calculate the marginal propensity to consume for the economy from the information given in Table 10.4.

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) can be calculated by dividing the change in consumption by the change in income. In this case, we can use the information about aggregate expenditures and real GDP to calculate the change in consumption:
Change in consumption = Aggregate expenditures - Real GDP
= 6710 - 6330
= 380
The change in income can be calculated by subtracting imports and savings from real GDP:
Change in income = Real GDP - Imports - Savings
= 6330 - 870 - 930
= 4530
Therefore, the MPC is:
MPC = (Change in consumption) / (Change in income)
MPC = 380 / 4530
MPC = 0.0838, which is approximately 0.1 or 10%. However, since this is not one of the answer choices, the closest option is A) 0.9.

The Table Given Below Shows the Real GDP, Aggregate Expenditures