A What is the marginal propensity to consume Say you were hi

A) What is the marginal propensity to consume? Say you were hired to create three economic incentives that would cause it to increase. What would they be?

Solution

Marginal propensity to consume means by how much consumption changes as income changes. It is change in average propensity to consume (APC) as income changes. It can be written as change in consumption /change in income(instead of consumption/income in case of APC)

The three economic incentives that I would change would change motives and thus mpc

1 providing social security schemes so that people do not save for future

2 reducing interest rates to reduce saving and thus increase mpc

3 taxes on inheritance to reduce desire to bequeath a fortune