The amount by which consumption increases when after-tax income increases by $1 is called the:
A) marginal propensity to consume.
B) marginal consumption revenue.
C) variable propensity to consume.
D) consumption multiplier effect.

Question

Quizplus · Accepted Answer

The correct term for the amount by which consumption increases when after-tax income increases by $1 is the marginal propensity to consume (MPC). This is a measure of how much of a given increase in income is spent on consumption. A higher MPC means that consumers are more likely to spend any extra income, leading to a greater boost to overall economic activity.

The Amount by Which Consumption Increases When After-Tax Income Increases