Question : The marginal propensity to consume (MPC) is the proportion of an additional:
Option 1: Income that is saved
Option 2: Income that is consumed
Option 3: Investment that is made
Option 4: Government expenditure that is incurred
Correct Answer: Income that is consumed
Solution : The correct answer is (b) Income that is consumed.
The MPC represents the fraction of an increase in income that individuals or households choose to spend on consumption. It indicates how much of each additional dollar of income is allocated to consumption rather than saving.
The MPC is an important concept in economics as it influences the multiplier effect and the overall impact of changes in autonomous expenditures on aggregate demand and economic growth. A higher MPC implies a larger proportion of income being spent on consumption, leading to a greater increase in aggregate demand and a stronger multiplier effect.
Question : The marginal propensity to save (MPS) is the proportion of an additional:
Question : The marginal propensity to consume (MPC) is defined as the:
Option 1: Proportion of income that is saved
Option 2: Proportion of income that is consumed
Option 3: Proportion of income that is taxed
Option 4: Proportion of income that is invested
Question : The marginal propensity to save (MPS) is defined as the:
Question : __________________________ refers to the consumption expenditure to the corresponding level of income.
Option 1: Average propensity to consume
Option 2: Marginal propensity to consume
Option 3: Average propensity to save
Option 4: None of the above.
Question : The marginal propensity to consume (MPC) is 0.8. If there is an autonomous increase in investment spending of INR 1,500, what will be the change in equilibrium income?
Option 1: INR 1,200
Option 2: INR 1,500
Option 3: INR 7,500
Option 4: INR 6,000
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