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poizon [28]
3 years ago
5

Scenario 34-2. The following facts apply to a small, imaginary economy. • Consumption spending is $6,720 when income is $8,000.

• Consumption spending is $7,040 when income is $8,500. Refer to Scenario 34-2. The marginal propensity to consume for this economy is Group of answer choices 0.840. 0.83. 0.64. 0.56.
Business
1 answer:
Temka [501]3 years ago
3 0

Answer:

0.64

Explanation:

Marginal propensity to consume is given by the ratio of the change in consumption spending to the change in income.

In this scenario, the change in consumption spending is:

\Delta CS = \$7,040-\$6,720\\\Delta CS = \$320

The change in income is:

\Delta I = \$8,500-\$8,000\\\Delta CS = \$500

The marginal propensity to consume for this economy is:

MPC=\frac{\Delta CS}{\Delta I}=\frac{\$320}{\$500} \\MPC =0.64

The answer is 0.64.

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