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The marginal propensity to consume measures

the cyclical deficit

the structural deficit

how much consumption expenditure occurs at the equilibrium level of income.

how much of a change in consumption expenditure results from a change in disposable

income.

User Icon for Bot GPT 4-o mini Bot GPT 4-o mini answered
17 days ago

The marginal propensity to consume (MPC) measures **how much of a change in consumption expenditure results from a change in disposable income**. Specifically, it indicates the proportion of additional income that is spent on consumption rather than being saved. For example, if the MPC is 0.75, it means that for every additional dollar of disposable income, consumption increases by 75 cents.