Question

The marginal propensity to consume is the: ratio of consumption to income. amount consumed out of an additional dollar of income. amount available for consumption after precautionary saving. ratio of consumption to wealth.

Answer 1

The correct answer is: amount consumed out of an additional dollar of income.

Step-by-step explanation:

The marginal propensity to consume is a measure to show the increase in consumption of goods and services due to an increase in the disposable income of the consumer.

It is measured by the ratio of change in consumption and change in income. It can also be calculated as 1 - MPS, where MPS is the marginal propensity to save. In other words, MPS is the ratio of change in savings and change in income.