Question

If the marginal propensity to consume is 0,6 which of the following statements is correct?

a. It means that 60% of total income earned is saved.

b. It means that 60% of an increase in income will be used for consumption, while the remaining 40% will be saved.

c. It means that a change in income does not affect the marginal propensity to consume.

d. It means that 60% of the increase in income is saved, while the remaining 40% will be used for consumption.

Answer 1

NO a. It means that 60% of total income earned is saved.

YES b. It means that 60% of an increase in income will be used for consumption, while the remaining 40% will be saved.

NO c. It means that a change in income does not affect the marginal propensity to consume.

NO d. It means that 60% of the increase in income is saved, while the remaining 40% will be used for consumption.