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If the MPC is 0.80 and disposable income increases from 32,000 billion to $37,000 billion, then consumption will increase by: A. $1,000 billion. B. $29,600 billion. C. $5,000 billion. D. $4,000 billion.

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abiolataiwo2015

If the MPC is 0.80 and disposable income increases from 32,000 billion to $37,000 billion, then consumption will increase by: B. $29,600 billion.

Increase in consumption

Using this formula=Increase in disposable income×MPC

Where:

Increase in disposable income=$37,000

MPC=0.80

Let plug in the formula

Increase in disposable income=$37,000 billion×0.80

Increase in disposable income=$37,000 billion×0.80

Increase in disposable income=$29,600 billion

Therefore consumption will increase by:  B. $29,600 billion.

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