(Advanced analysis) Assume the following consumption schedule: C = 20 + 0.9Y, where C is consumption and Y is disposable income. The MPC is
A) 0.45.
B) 0.20.
C) 0.50.
D) 0.90.

Question

Quizplus · Accepted Answer

The Marginal Propensity to Consume (MPC) is the change in consumption (C) for a given change in disposable income (Y), which is represented by the coefficient of Y in the consumption function. In the given equation C = 20 + 0.9Y, the MPC is 0.9.

(Advanced Analysis) Assume the Following Consumption Schedule: C = 20