ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The average amount of income a comsumer spends on goods and services
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The proportion of all of their income a consumer spends
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The proportion of any additional income a consumer will spend on goods and services
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The amount the initial round of spending is multiplied by
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Detailed explanation-1: -Marginal Propensity to Consume is the proportion of an increase in income that gets spent on consumption. MPC varies by income level. MPC is typically lower at higher incomes.
Detailed explanation-2: -Marginal propensity to consume (MPC) refers to the proportion of extra income that a person spends instead of saves.
Detailed explanation-3: -The marginal propensity to consume is the extra money we spend, ultimately creating an increase in demand and spending. The consequence of the extra spending and producing is an overall increase in income, which is called the multiplier effect.
Detailed explanation-4: -The correct answer is rate of change of consumption as income changes. Marginal propensity to consume refers to the change in consumption with respect to the change in income.
Detailed explanation-5: -When we observe an MPC that is equal to one, it means that changes in income levels lead to proportionate changes in the consumption of a particular good.