"The marginal propensity to consume" refers to the additional
A)desired saving that occurs out of an additional dollar of disposable income.
B)desired consumption that occurs over time.
C)desired consumption that occurs out of an additional dollar of disposable income.
D)desired consumption that occurs out of an additional dollar of investment.
E)desired consumption caused by a change in tastes.

Question

Quizplus · Accepted Answer

The marginal propensity to consume is the fraction of additional disposable income that a household spends on consumption. It measures the increase in consumption as disposable income goes up by one unit. Therefore, it refers to the desired consumption that occurs out of an additional dollar of disposable income.

"The Marginal Propensity to Consume" Refers to the Additional