Given the equations for C,I,G,and NX below,what is the marginal propensity to consume? C = 2,000 + 0.9Y
I = 2,500
G = 3,000
NX = 400
A)-0.1
B)0.1
C)0.9
D)2000

Question

Quizplus · Accepted Answer

Marginal propensity to consume (MPC) measures the change in consumer spending caused by a change in income. It is calculated as the change in consumption divided by the change in income. In this case, the consumption function is C = 2,000 + 0.9Y, where Y is income.
The coefficient of Y (0.9) is the MPC in this equation. It represents the fraction of additional income that will be spent on consumption (or the increase in consumption that results from a $1 increase in income). Therefore, the answer is C) 0.9 as it represents the MPC in the given equation.

Given the Equations for C,I,G,and NX Below,what Is the Marginal