The MPC in the economy depicted in figure above is A Variabl

The MPC in the economy depicted in figure above is:

A) Variable depending on the level of disposable income
B) 0.67
C) 0.9
D) 1.0

Solution

C = A + BY where A: Autonomous consumption & B: MPC

When Y = 0, C = 10

10 = A + 0 = A

So,

C = 10 + BY

When Y = 30, C = 30

30 = 10 + B x 30

30B = 20

B = 20/30 = 0.67

Correct option (B)