Answer to Question #74626 in Macroeconomics for Nicole Kimbrough

Question

If the discretionary income in a nation rises from $13 trillion to $15 trillion and consumption spending increases from $12 trillion to 13.5 trillion what is the marginal propensity to consume?

Answer 1

marginal propensity to consume = (consumption spending2 - consumption spending1)/( income2 – income1) = ($13.5 - $12) / ($15-$13) = 0.75