Section: Principles of Macroeconomics

8) Suppose consumption is $10 million when disposable income is $10.5 million, and consumption is $10.5 million when disposable income is $11.5 million, the marginal propensity to consume is

1. .50
2. .75
3. .80
4. .90

The marginal propensity to consume is the ratio of the change in consumption relative to the change in disposable income between two levels of disposable income.