Question

If consumption spending increases from $758 to $767 billion when disposable income increases from $912 to $927 billion, it can be concluded that the marginal propensity to consume is

Answer 1

In economics, the marginal propensity to consume,or abbreviated as MPC, is the ratio of the change of consumption to the change of income. In other words, the MPC is the slope of a consumption vs. income plot graph. Analytically, its equation is

MPC = ΔC/ΔI
MPC = ($767-$758)/($927-$912)
MPC = 0.6 or 60%