The average propensity to consume equals the
A) change in personal consumption expenditures divided by the current level of consumption expenditures.
B) amount spent on consumption divided by the amount of disposable income.
C) change in personal consumption expenditures divided by the change in disposable income.
D) personal consumption expenditures divided by personal saving.
E) sum of personal consumption expenditures and disposable income divided by 2.

Question

Quizplus · Accepted Answer

The average propensity to consume (APC) is defined as the amount spent on consumption divided by the amount of disposable income. It measures the proportion of total income that is spent on consumption. Therefore, choice B is the correct answer. Choice A is incorrect because it compares a change in consumption to the current level of consumption. Choice C is incorrect because it compares a change in consumption to a change in disposable income, not the current level of disposable income. Choice D is incorrect because it compares consumption to saving, which is not relevant to calculating the APC. Choice E is incorrect because it does not take into account the difference between consumption and disposable income.

The Average Propensity to Consume Equals the