If the Marginal Propensity to Consume Was 0

question 92

Multiple Choice

If the marginal propensity to consume was 0.9, it would mean that:

• A) consumers spend $9 out of every $10 of additional disposable income.
• B) consumers save $9 out of every $10 of additional disposable income.
• C) consumers spend $1 out of every $10 of additional disposable income.
• D) people should save more.

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Definitions:

Market Quantity

The total amount of a good or service that is bought and sold in a market.

Marginal Expenditure

The additional cost incurred by producing one more unit of a good or service.

Average Expenditure

The total amount spent on a specific good or service divided by the quantity purchased, indicating the average amount an individual pays for a unit of that good or service.

Extra Unit

Refers to an additional unit of production or service, considering marginal costs or benefits associated with producing or consuming one more unit.