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If income increases from 2500 to 3900 and autonomous investment increases by 350 the mpc should be?
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If income increases from 2500 to 3900 and autonomous investment increa...
Calculating the Marginal Propensity to Consume (MPC)
To calculate the Marginal Propensity to Consume (MPC), we need to first understand the formula for MPC. The MPC is the change in consumption divided by the change in income. In this case, the change in income is from 2500 to 3900, which is an increase of 1400.

Step 1: Calculate the change in consumption
Change in income = 3900 - 2500 = 1400
Autonomous investment increase = 350
Change in consumption = Change in income - Autonomous investment increase
Change in consumption = 1400 - 350 = 1050

Step 2: Calculate the MPC
MPC = Change in consumption / Change in income
MPC = 1050 / 1400
MPC = 0.75
Therefore, the Marginal Propensity to Consume (MPC) in this scenario is 0.75.

Explanation:
The MPC indicates the proportion of an increase in income that is spent on consumption. In this case, for every additional unit of income, 0.75 units are spent on consumption. This means that households are likely to spend a significant portion of any increase in income on consumption, which can have implications for economic growth and stability. A high MPC suggests that consumers are more likely to spend rather than save their additional income, which can stimulate aggregate demand and boost economic activity.
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If income increases from 2500 to 3900 and autonomous investment increases by 350 the mpc should be?
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