Question

The marginal propensity to consume _____________________:

1. It is the fraction of disposable income consumed

2. Plus the marginal propensity to save equals 1

3. It is the fraction of GDP consumed

4. It is the amount of disposable income consumed

Answer #1

Since the marginal propensity to consume is the additional consumption from additional disposable income.

MPC=change in consumption / change in disposable income

Marginal propensity to consume (MPC)

MPC=change in consumption / change in disposable income

Marginal propensity to save is calculated by the following formula

MPS=change in the saving/ change in the income

MPS+MPC=1

Hence it can be said that the marginal propensity to consume plus the marginal propensity to save equals 1.

Hence option 2 is the correct answer.

1.
Suppose disposable income is $1,000 when the average propensity
to consume is 0.75. Then
Group of answer choices
the marginal propensity to consume must be 0.75.
the slope of the consumption schedule must be 0.25
the level of saving is $250.
the average propensity to save must be 0.2
2.
Which of the following is correct?
Group of answer choices
As disposable income falls, the APS rises.
As disposable income rises, the MPC falls.
As disposable income falls, the...

Suppose disposable income is $1,000 when the average propensity
to consume is 0.75. Then
Group of answer choices
the marginal propensity to consume must be 0.75.
the slope of the consumption schedule must be 0.25
the level of saving is $250.
the average propensity to save must be 0.2
If the MPC is .70 and investment increases by $6 billion, the
equilibrium GDP will:
Group of answer choices
increase by $10 billion.
increase by $20 billion.
increase by $42 billion....

How are marginal propensity to Consume and marginal Propensity
to Save calculated?

a) Suppose the marginal propensity to consume is 0.7, what will
happen to real GDP if planned investment increases by $300
billion?b) Suppose the marginal propensity to save is .4, what how
much will taxes have to change if real GDP decreases by $450
billion?

Assume an economy with no foreign sector, a marginal propensity
to save out of disposable income equal to 0.2, and a marginal
income tax rate of t = 0.25. If autonomous saving decreases by 300,
which of the following is true? The answer is A. Total consumption
will increase by 750. Could you show how to get this?

Here are some facts
about the economy of Inferior.
Marginal propensity to
consume 3/5 marginal propensity to import 0 autonomous consumption
4 exports 0 private investment 20 income tax rate 0 government
expenditures 0
Income consumption
investment government aggregate expenditures expenditures 0
10
20
30
40
50
60
70
80
90
Suppose that
investment rises to 28. What is the new GDP?

Define “marginal propensity to consume” (MPC) and “marginal
propensity to save” (MPS) in plain English. What must be true about
the sum MPC+MPS?

A6. The marginal propensity to consume
(I) is the increase in disposable income from a $1 increase in
consumer spending.
(II) is the increase in consumer spending from a $1 increase in
disposable income.
(III) is usually a number between zero and one, but occasionally is
a number greater than one.
(IV) can be written as the change in consumer spending divided by
the change in disposable income.
(A) Statements I, III, and IV are all correct.
(B) Statements II,...

4. [Marginal Propensity to Consume] Find the marginal propensity
to consume (MPC = dC/dY) for each of the following consumption
functions.
(a) C = C0 +bY, C0 = 1500, b = 0.6.
(b) C = 1200+0.75Yd, Yd = Y ?T, and T = 100.
(c) C = 2000+0.8Yd, Yd = Y ?T, and T = 300+0.1Y.

In an economy with no exports and imports, autonomous
consumption is $2 trillion, the marginal propensity to consume is
0.6, investment is $5 trillion, and government expenditure on
goods and services is $6 trillion. Taxes are $4 trillion and do
not vary with real GDP. If real GDP is $33.1, calculate
disposable income, consumption expenditure, and aggregate planned
expenditure. What is equilibrium expenditure?
The author got the equilibrium expenditure is $26.5 trillion
but the expert got 25. Please break down...

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