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Answer :
Final answer:
The marginal propensity to consume (MPC) is calculated by dividing the change in consumption expenditure by the change in disposable income. In this case, both changed by $1 trillion, giving an MPC of 1. Therefore, the correct answer is D. $8 trillion; 1.00.
Explanation:
To calculate the marginal propensity to consume (MPC), we look at the change in consumption expenditure divided by the change in disposable income. From the data provided, disposable income increased from $7 trillion to $8 trillion, which is a change of $1 trillion. Simultaneously, consumption expenditure increased from $6.8 trillion to $7.8 trillion, also a change of $1 trillion.
Thus, using the formula for MPC which is:
MPC = Change in Consumption Expenditure / Change in Disposable Income
We calculate the MPC as: $1 trillion / $1 trillion = 1.
The correct answer to the question is D. $8 trillion; 1.00, as the change in consumption matches the change in disposable income, pointing to an MPC of 1.
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