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Suppose two successive levels of disposable personal income increases from $16 to $21 billion and the change in consumption spending between these two levels of disposable personal income is $2 billion, then the MPC will equal _____.

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Nyctalus

Answer: 0.4

Explanation: MPC, that is, marginal propensity to consume is used to quantify the consumption induced. As we know that, MPC is calculated as follows :-

[tex]MPC\:=\:\frac{Chane\:in\:consumer\:spending}{change\:in\:income}[/tex]

[tex]MPC\:=\:\frac{2}{21-16}[/tex]

[tex]MPC\:=\:\frac{2}{5}[/tex]

                 = 0.4

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