As household wealth increases, it will experience a(n):
A)increase in its MPC.
B)decrease in autonomous consumption.
C)decrease in its MPS.
D)increase in autonomous consumption.
E)increase in autonomous saving.

Question

Quizplus · Accepted Answer

As household wealth increases, autonomous consumption will increase as people have more disposable income that they are likely to spend. This means that the MPC (marginal propensity to consume) will also increase, but the MPS (marginal propensity to save) will likely decrease as people see less of a need to save for emergencies or unexpected expenses. Option A and E are incorrect as an increase in autonomous consumption means a decrease in autonomous saving. Option B is incorrect as autonomous consumption is likely to increase, not decrease.

As Household Wealth Increases, It Will Experience A(n)