Question

Suppose that a consumer has a marginal propensity to consume of 0.7. If this consumer earns an extra $2, her consumption spending would be expected to

Answer 1

Her consumption spending will rise by $1.40

Step-by-step explanation:

Marginal propensity to consume is 0.7. This information means that the individual will consume 70% of every single dollar she earns. Hence, if she consumer earns an extra $2, her consumption spending will rise by $1.40