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Choose the Correct Alternative from Given Options: Suppose in a Hypothetical Economy, the Income Rises From ₹ 5,000 Crores To ₹ 6,000 Crores. as a Result, the Consumption Expenditure Rises from - Economics

MCQ

Choose the correct alternative from given options:
Suppose in a hypothetical economy, the income rises from  5,000 crores to  6,000 crores. As a result, the consumption expenditure rises from ₹ 4,000 crores to ₹ 4,600 crores. Marginal propensity to consume in such a case would be __________.

Options

  • 0.8

  • 0.4

  • 0.2

  • 0.6

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Solution

Suppose in a hypothetical economy, the income rises from  5,000 crores to  6,000 crores. As a result, the consumption expenditure rises from ₹ 4,000 crores to ₹ 4,600 crores. The marginal propensity to consume in such a case would be 0.6.
The correct answer is option 0.6.

Concept: Consumption Function and Propensity to Save
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