When disposal income is $5.0 trillion, consumption expenditure is $4.5 trillion. When disposal income is $6.0 trillion, consumption expenditure is $5.0 trillion. What is the marginal propensity to consume?
What will be an ideal response?
The marginal propensity to consume is the change in consumption expenditure divided by the change in disposable income that brought it about. In this case, the marginal propensity to consume equals ($0.5 trillion รท $1.0 trillion) = 0.50.
Economics
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