Question

The marginal propensity to consume (mpc) is the: Select one: a. amount by which disposable income increases when consumption increases by $1.

Answer 1

As per our research the complete question is

The marginal propensity to consume (mpc) is the:

A) amount by which disposable income increases when consumption increases by $1.

B) amount by which consumption increases when disposable income increases by $1.

C) percentage by which consumption increases when disposable income increases by 1%.

D) percentage by which disposable income increases when consumption increases by 1%

Answer:

The correct answer is B) amount by which consumption increases when disposable income increases by $1.

Step-by-step explanation:

The marginal propensity to consume (mpc) is the extra consumer spending arising from an increase in national income

Suppose you receive a $500 bonus on top of your normal annual earnings. You suddenly have $500 more in income than you did before. If you decide to spend $400 of this marginal increase in income on a new suit and save the remaining $100, your marginal propensity to consume will be 0.8 ($400 divided by $500).