Ask Question
20 May, 06:26

Suppose that consumption is $500 and that the marginal propensity to consume is 0.6. If disposable income increases by $1,000, consumption spending will increase by A. $600 B. $ 3,000 C. $1,360 D. $ 3,750 E. $1,666.67

+5
Answers (1)
  1. 20 May, 10:13
    0
    A. $600

    Explanation:

    The formula and the computation of the Marginal propensity to consume are shown below:

    Marginal propensity to consume = Change in consumer spending : Change in disposal income

    0.6 = Change in consumer spending : $1,000

    So, the change in consumer spending is

    = $1,000 * 0.6

    = $600

    Hence, the consumption that is given in the question is not considered. Therefore, ignored it
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Suppose that consumption is $500 and that the marginal propensity to consume is 0.6. If disposable income increases by $1,000, consumption ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers