Explain what it means if an economy’s MPC is .81. Answer:

Question

Question

business economics

Answer 1

Answer #1

Marginal Propensity to consume is defined as the ratio change in consumption to change in disposble income.

It means how much percentage consumption will increase out of additional consumption.

MPC=Change in consumption/ change in disposable income

If an economy’s MPC is .81, it means that out of each $1 additional disposable income, $0.81 will be consumed while 0.19 will be saved.

Answer 2

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