Question

In the term project, the estimate for the marginal propensity to consume is:

A. 1. B. 0.79. C. -67.58. D. none of the above.

Answer 1

The Marginal Propensity to Consume (MPC) refers to how sensitive consumption in a given economy is to unitized changes in income levels.

MPC is equal to = Change in consumption / Change in income

Now

A) In first case MPC = 1 , seems to be not possible, consumer of whole country never consume whole of their income , they also tends save it .

B) In second case , MPC = 0.79 , as Mpc lies between 0 and 1 , so this might be the case

C) In third one MPC = -67.58, MPC lies between 0 and 1 and can never be negative . So this case totally false .

Hence ( B ) part is a correct answer