With which of the following marginal propensities to consume would a given change in disposable income have the greatest effect on consumption?
A)0.2
B)0.4
C)0.6
D)0.8

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) represents the fraction of an increase in income that households spend on consumption, and the higher the MPC, the greater the effect on consumption for a given change in disposable income. Therefore, the answer is D as the MPC of 0.8 indicates that for every additional $1 of disposable income, households will spend $0.80 on consumption, resulting in a greater effect on consumption compared to the other choices.

With Which of the Following Marginal Propensities to Consume Would