The marginal propensity to consume, lies between

Correct option is B

The Correct Answer is (B)0 to 1

Explanation:

The marginal propensity to consume (MPC) is a concept in economics that refers to the change in consumption resulting from a change in income. It measures the proportion of additional income that a household is likely to consume rather than save.

The MPC always lies between 0 and 1 because:

• If MPC = 0: This means that an individual or household does not increase their consumption at all when income increases (they save all additional income).

• If MPC = 1: This means that the entire increase in income is consumed, with no saving at all.

Therefore, the marginal propensity to consume cannot be negative or exceed 1.

Information Booster:

1. MPC is a critical concept in Keynesian economics, as it helps determine the multiplier effect of fiscal policy on the economy.

2. If MPC is higher, the multiplier effect will be greater, leading to more significant changes in overall economic activity with changes in income.

3. The value of MPC can vary across individuals, households, and economies, but it generally stays between 0 and 1.

4. In real-world scenarios, MPC can change based on factors such as income level, economic conditions, and consumer confidence.