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

Question

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

Quizplus · Accepted Answer

A lower marginal propensity to consume means that for every dollar increase in disposable income, a smaller proportion of the increase will be spent on consumption. Therefore, a given change in disposable income will have the smallest effect on consumption with a lower marginal propensity to consume, such as 0.2.

A Given Change in Disposable Income Would Have the Smallest