Question

A worker gets a raise of $120 per month and quickly decides to spend $90 of the money on necessities and the occasional luxury, while putting the remaining $30 into retirement savings. Based on this decision, calculate the worker's marginal propensity to consume, or MPC, as a decimal. Click or tap the numbers or use your keyboard to type. If you're not sure, just take a guess.

Answer 1

MPC = 0.75

Step-by-step explanation:

Marginal Propensity to Consume (MPC) is a part of Keynesian macroeconomic theory and is calculated by the change in consumption divided by the change in income. It quantifies the increased consumption which occurs with an increase in disposable income

`MPC = (/Δconsumption)/(/Δincome)`

`MPC = (90)/(120)`

`MPC = 0.75`