Question

Jack​ Nelson, a supervisor in the hardware department at​ Sears, received a​ $3,000 increase in his annual disposable income. Suppose his marginal propensity to consume is 0.80. How much of the​ $3,000 increase will Jack spend on​ consumption?

Answer 1

Answer: $2400

Step-by-step explanation:

The marginal propensity to consume is calculated as the change in consumption divided by the change in income.

From the given information in the question,

0.80 = Change in consumption/3000

Change in consumption = 3000 × 0.80 = $2,400