The level of consumption spending is equal to
A) the baseline level of consumption spending times disposable income plus the marginal propensity to consume.
B) the baseline level of consumption spending plus the marginal propensity to consume times income.
C) the baseline level of consumption spending plus the marginal propensity to consume times disposable income.
D) the marginal propensity to consume times disposable income.

Question

Quizplus · Accepted Answer

The level of consumption spending is determined by the baseline (autonomous) level of consumption spending plus the product of the marginal propensity to consume (MPC) and disposable income. This reflects the idea that consumption is influenced by both a base level of spending (not dependent on current income) and additional spending that varies with income.

The Level of Consumption Spending Is Equal to