How much is the marginal propensity to consume when disposable income rises from 0 to $1 trillion?

A) 0
B) .25
C) .5
D) .75
E) 1.0

Question

How much is the marginal propensity to consume when disposable income rises from 0 to $1 trillion?A) 0B) .25C) .5D) .75E) 1.0

Paige Narramore · Accepted Answer

Final Answer : C, Explanation :  The marginal propensity to consume (MPC) is calculated as the change in consumption divided by the change in disposable income. From 0 to $1 trillion, consumption increases from $1 trillion to $1.5 trillion, a change of $0.5 trillion. Disposable income increases by $1 trillion. Thus, MPC = $0.5 trillion / $1 trillion = 0.5.

How much is the marginal propensity to consume when disposable income rises from 0 to $1 trillion?

A) 0
B) .25
C) .5
D) .75
E) 1.0

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