If consumption increases by $75 billion when disposable personal income increases by $100, the marginal propensity to consume is 0.75.

Question

Quizplus · Accepted Answer

The given statement is true. The marginal propensity to consume (MPC) is the ratio of the change in consumption to the change in disposable personal income. In this case, the change in consumption is $75 billion and the change in disposable personal income is $100, resulting in an MPC of 0.75 ($75 billion/$100).

If Consumption Increases by $75 Billion When Disposable Personal Income