Answer to Question #13048 in Macroeconomics for Sirkka

Question

calculate the marginal propensity to consumer when the aggregate output/income changes from 2500 to 300?

Answer 1

marginal propensity to consumer = change of consumption/ change of income
If
consumption is permanent and aggregate output/income changes from 2500 to 300 .
we have decreasing of income by 2200
so new level of marginal propensity to
consumer will be 0.045 of previous level
So decreasing of marginal propensity
to consumer is 95.5%