Asked by Ricky Moore on Jul 15, 2024
Verified
The table given below shows the real gross domestic product (GDP) ,consumption,and planned investment in an economy.The marginal propensity to consume (MPC) in the economy is:
?
Table 9.3
?
?
Real GDP ($) Consumption ($) Planned Investment ($) 01401001002201002003001003003801004004601005005401006006201007007001008007801009008601001,0009401001,1001,0201001,2001,1001001,3001,180100\begin{array} { c c c } \begin{array} { c } \text { Real } \\\text { GDP } ( \$ ) \end{array} & \text { Consumption } ( \$ ) & \begin{array} { c } \text { Planned } \\\text { Investment } ( \$ ) \end{array} \\\hline 0 & 140 & 100 \\100 & 220 & 100 \\200 & 300 & 100 \\300 & 380 & 100 \\400 & 460 & 100 \\500 & 540 & 100 \\600 & 620 & 100 \\700 & 700 & 100 \\800 & 780 & 100 \\900 & 860 & 100 \\1,000 & 940 & 100 \\1,100 & 1,020 & 100 \\1,200 & 1,100 & 100 \\1,300 & 1,180 & 100\end{array} Real GDP ($) 01002003004005006007008009001,0001,1001,2001,300 Consumption ($) 1402203003804605406207007808609401,0201,1001,180 Planned Investment ($) 100100100100100100100100100100100100100100
A) 0.
B) 0.2.
C) 0.8.
D) 0.9.
E) 80.
Marginal Propensity
The fraction of an additional amount of income that is spent on consumption. This is a key factor in determining the impact of an income change on the economy.
- Comprehend the principles of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).
Verified Answer
SD
Sarah Dykstra
Jul 17, 2024
Final Answer :
C
Explanation :
The Marginal Propensity to Consume (MPC) is calculated as the change in consumption divided by the change in income. From the table, when income increases by $100 (from $0 to $100, for example), consumption increases by $80 (from $140 to $220). Therefore, MPC = $80 / $100 = 0.8.
Learning Objectives
- Comprehend the principles of Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS).