Given the equations for C, I, G, and NX below, what is the marginal propensity to consume? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400
A)-0.1
B)0.1
C)0.2
D)0.9
E)2,000

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is the change in consumption (C) divided by the change in income (Y). In the equation C = 2,000 + 0.9Y, the coefficient of Y (0.9) represents the MPC, indicating that for every additional unit of income, consumption increases by 0.9 units.

Given the Equations for C, I, G, and NX Below