If the Marginal Propensity to Consume (MPC)is Equal to 0

question 21

Multiple Choice

If the marginal propensity to consume (MPC) is equal to 0.9, an increase in household income causes desired consumption expenditure to

• A)rise by less than the full increase in income.
• B)rise by more than the increase in income.
• C)remain constant, because the MPC is also constant.
• D)fall, as an increase in income will increase saving.
• E)rise by the full increase in income.

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Definitions:

Cognitive

Relating to mental processes such as awareness, perception, reasoning, and judgement.

Trait

A stable characteristic or quality that defines an individual's personality and influences behavior.

Cognitive Psychology

The study of mental processes such as "attention, language use, memory, perception, problem-solving, creativity, and thinking."

Mental Processes

The internal cognitive operations that underlie thinking, understanding, reasoning, and problem-solving.