The marginal propensity to consume equals
A) consumption expenditure divided by disposable income.
B) consumption expenditure divided by the change in disposable income.
C) the change in consumption expenditure divided by the change in disposable income.
D) the change in consumption expenditure divided by disposable income.
E) the change in autonomous consumption divided by the change in induced consumption.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated as the change in consumption expenditure divided by the change in disposable income. This means it measures the increase in consumer spending that occurs as disposable income increases. It helps to predict the multiplier effect of changes in disposable income on aggregate demand.

The Marginal Propensity to Consume Equals