Question

An increase in the propensity to consume will​ ___________. A. raise consumption spending. B. increase the demand for output. C. raise equilibrium output in the short run. D. all of the above.

Answer 1

Answer: The correct answer is "D. all of the above.".

Explanation: The marginal propensity to consume measures how much a person's consumption increases when their disposable income increases (the income they have after paying taxes) in a monetary unit, so an increase in this would cause a higher consumption, which would cause higher demand and would modify the equilibrium output.