Question

In an economy with no taxes and no imports, when disposable income increases from $2000 to $3000, consumption increases from $1500 to $2100. given this information, the marginal propensity to consume is

Answer 1

In an economy with no taxes and no imports, when disposable income increases from $2000 to $3000, consumption increases from $1500 to $2100. given this information, the marginal propensity to consume is 0.6 Disposable in come =3000-2000=$1000. consumption = 2100-1500=$600. marginal propensity=$600/$1000=0.6