Which of the following is true about the marginal propensity to consume?

• A. It measures the change in savings resulting from a change in income.
• B. It represents the total amount of income spent on consumption.
• C. It measures the change in consumption resulting from a change in income.
• D. It is always equal to 1 for all individuals.

Answer: (C)

Verified step by step guidance

1. Understand the definition of the marginal propensity to consume (MPC): it measures how much consumption changes when income changes by one unit.
2. Express MPC mathematically as the change in consumption divided by the change in income: \(\text{MPC} = \frac{\Delta C}{\Delta Y}\), where \(\Delta C\) is the change in consumption and \(\Delta Y\) is the change in income.
3. Recognize that MPC does not measure changes in savings; instead, the marginal propensity to save (MPS) measures the change in savings resulting from a change in income.
4. Note that MPC is not the total amount of income spent on consumption, but rather the rate at which consumption changes with income.
5. Understand that MPC can vary between 0 and 1 for different individuals and situations; it is not always equal to 1.