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Answer :
Final answer:
The marginal propensity to consume (MPC), calculated from a scenario where disposable income and consumption both increase, is 0.67. This value indicates the proportion of additional disposable income that is spent on consumption.
Explanation:
If disposable income increases from​ $4 trillion to​ $7 trillion, consumption expenditure increases from​ $3.5 trillion to​ $5.5 trillion, and nothing else​ changes, the marginal propensity to consume is calculated as the change in consumption divided by the change in disposable personal income. This is an important concept in understanding consumer behavior and macroeconomic theory.
To find the marginal propensity to consume (MPC), we subtract the initial consumption expenditure from the final consumption expenditure, and then divide that by the change in disposable income:
MPC = (Final Consumption - Initial Consumption) / (Final Disposable Income - Initial Disposable Income)
MPC = ($5.5 trillion - $3.5 trillion) / ($7 trillion - $4 trillion) = $2 trillion / $3 trillion = 0.67.
Therefore, the marginal propensity to consume in this scenario is 0.67.
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