Question

If consumption increases by $9 when disposable income increases by $10, the marginal propensity to consume (mpc) equals:

1.0.
0.1.
0.9.
9.0.

Answer 1

The marginal propensity to consume (MPC) is 0.9.

Step-by-step explanation:

The marginal propensity to consume (MPC) measures the proportion of an increase in disposable income that is used for consumption. In this case, consumption increases by $9 when disposable income increases by $10. To calculate the MPC, divide the change in consumption by the change in income: $9/$10 = 0.9. Therefore, the marginal propensity to consume (MPC) equals 0.9