The marginal propensity to consume (mpc) is the:

A. amount by which disposable income increases when consumption increases by $1.

B. amount by which consumption increases when disposable income increases by $1.

C. percentage by which consumption increases when disposable income increases by 1 percent.

D. percentage by which disposable income increases when consumption increases by 1 percent.

Question

Business

Bailey Figueroa

20 July, 09:30

The marginal propensity to consume (mpc) is the:

A. amount by which disposable income increases when consumption increases by $1.

B. amount by which consumption increases when disposable income increases by $1.

C. percentage by which consumption increases when disposable income increases by 1 percent.

D. percentage by which disposable income increases when consumption increases by 1 percent.

+3

Answers (1)

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Lyla Garrett · Answer 1

Answer: The marginal propensity to consume (mpc) is the percentage by which consumption increases when disposable income increases by 1 percent.

Explanation: The MPC measures the porcentege of the increase in your earnings that you destinates to consumption.

For instance if you earn $100 and have and increase in your income of $1 you can spend or save that extra $1 or a part of it. The MPC measures what part of that $1 you spend. If you spend $0,80 your MPC is 80% because you spent $0,80 and you save $0,20.