Which of the following is the correct formula for the marginal propensity to consume?
A) MPC = 1 ÷ (1 - MPC).
B) MPC = (total consumption)÷ (total disposable income).
C) MPC = 1 - MPS.
D) MPC = (change in consumption)+ (change in disposable income).

Question

Quizplus · Accepted Answer

The correct formula for the marginal propensity to consume is MPC = 1 - MPS, where MPS is the marginal propensity to save. This formula represents the fraction of additional disposable income that is spent on consumption. Option A is incorrect as it is a formula for calculating the multiplier. Option B is incorrect as it calculates the average propensity to consume. Option D is incorrect as it does not represent the fraction of additional disposable income that is consumed.

Which of the Following Is the Correct Formula for the Marginal