In Macronesia, the MPC is approximately 0.80.If disposable income changes from 1,000 billion pukas to 1,500 billion pukas, then consumption will change by a(n)
A)decrease of 500 billion pukas.
B)increase of 500 billion pukas.
C)increase of 400 billion pukas.
D)increase of 800 billion pukas.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is 0.80, meaning for every additional puka of disposable income, consumption increases by 0.80 pukas. The change in disposable income is 500 billion pukas (1,500 - 1,000), so the change in consumption is 0.80 * 500 billion = 400 billion pukas.

In Macronesia, the MPC Is Approximately 0