Exhibit 11-1 Disposable income and consumption data
Income (Y)
Change inDisposable Income
Consumption (C)
0
500
1,000
1,000
1,400
2,000
1,000
2,200
3,000
1,000
2,900
4,000
1,000
3,500
5,000
1,000
4,000
In Exhibit 11-1, when disposable income is increased from $2,000 to $3,000 to $4,000,
A. total consumption increases by $1,000.
B. the marginal propensity to consume remains constant.
C. the marginal propensity to consume decreases from 0.7 to 0.6.
D. the marginal propensity to consume decreases from 0.8 to 0.7.
Answer: C
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