Question

Suppose that disposable income, consumption, and saving in some country are $800 billion, $700 billion, and $100 billion, respectively. next, assume that disposable income increases by $80 billion, consumption rises by $56 billion, and saving goes up by $24 billion.
a. what is the economy’s mpc?

Answer 1

The mpc is the marginal propensity to consume and is the ratio of the increase of spent money over increase in income so in this case the consumption rises by $56 billion and the disposable income by $80 billion so the mpc would be 56/80=0.7.