Question

Suppose Deborah gets a sales bonus at her place of work that gives her an extra $600 of disposable income. She chooses to spend $480 and save the remaining $120.

1. From this, you can tell that Deborah marginal propensity to consume (MPC) is __________.
a. 0.48
b. 0.12
c. 0.20
d. 0.80

Answer 1

Option (d) is correct.

Step-by-step explanation:

Suppose Deborah gets a sales bonus at her place of work,

Disposable Income, YD = $ 600

Consumption, C = $480

Savings , S = $ 120

Marginal propensity to consumer, MPC:

= Consumption ÷ Disposable Income

= 480 ÷ 600

= 0.8

Therefore, Deborah marginal propensity to consume (MPC) is 0.80

Option (d)