Suppose consumption is $20,000 when income is $32,000 and the MPC equals 0.8. When income increases to $40,000, consumption is
A) $26.400.
B) $28,000.
C) $32,000.
D) $72,000.

Question

Quizplus · Accepted Answer

MPC = (Change in consumption) / (Change in income)0.8 = (Change in consumption) / (40,000 - 32,000)0.8 = (Change in consumption) / 8,000Change in consumption = 0.8 * 8,000 = 6,400New consumption = 20,000 + 6,400 = 26,400

Suppose Consumption Is $20,000 When Income Is $32,000 and the MPC