What does the marginal propensity to expend mean?
A)It is the fraction of income that is not spent.
B)It is the ratio of change in income that results from a change in expenditures.
C)It is the ratio of change in expenditures that results from a change in income.
D)It is the fraction of income that is taxed.

Question

Quizplus · Accepted Answer

The marginal propensity to expend (MPE) is the ratio of change in expenditures that results from a change in income. In other words, it measures how much of an increase in income is spent, rather than saved or invested. For example, if a household's income increases by $100 and they spend $80 of that increase, the MPE would be 0.8 ($80/$100).

What Does the Marginal Propensity to Expend Mean