If income increases by $1,000, and consumption increases by $800, then the marginal propensity to consume is:
A)0.8
B)0.8.
C)1
D)1.
E)1.25
F)1.25.
G)0.75
H)0.75.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) is calculated by dividing the change in consumption by the change in income. In this case, MPC = $800/$1,000 = 0.8. A and D are incorrect because they are duplicates. E and F are incorrect because the calculated MPC is less than 1, not greater than 1. G and H are incorrect because they do not match the calculated MPC.

If Income Increases by $1,000, and Consumption Increases by $800