Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC) is
A) .25.
B) .75.
C) $1,000/$750 = 1.33.
D) 1/.25 = 4.
Answer: B
Suppose that when disposable income increases by $1,000, consumption spending increases by $750. Given this information, we know that the marginal propensity to consume (MPC) is
A) .25.
B) .75.
C) $1,000/$750 = 1.33.
D) 1/.25 = 4.
Answer: B