If consumption increases by $10 billion at each level of disposable income. The marginal propensity to consume will?

Business

1 answer:

zlopas [31]2 years ago

6 0

The marginal propensity to consume will not change, but the average propensity to consume will change.

Marginal propensity to consume (MPC) is defined as the percentage of total wage growth that consumers spend consuming goods and services rather than saving.

The multiplier depends on c1 or the marginal propensity to consume. If the marginal propensity to consume is less than 1, this means that the person is consuming less than 100% of his disposable income.

The marginal propensity to consume is equal to ΔC / ΔY, where ΔC is the change in consumption and ΔY is the change in income. If every $1 of income increases consumption by 80 cents, the MPC is 0.8 / 1 = 0.8.

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