Marginal propensity to consume – definition
The marginal propensity to consume (mpc) is the extra consumer spending arising from an increase in national income, expressed as:
If we take the following figures for GPD and consumption we can calculate the mpc:
This gives us:
|GDP|| ||+ $40bn|
|Consumption|| ||+ $25bn|
Therefore, the mpc is:
$25bn/$40bn; = 0.625
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