Question

What is the full form of MPC?

Hint:

The value of MPC always lies between 0 and 1 ($0<\text{MPC}<1$), meaning people usually spend a portion of their extra income and save the rest.

Answer 1

Step 1: Understanding the Concept:
In macroeconomics (Keynesian theory), MPC is a ratio that explains how consumption changes when income changes.
Step 2: Defining the Term:
The full form is Marginal Propensity to Consume.
Step 3: Explaining the Formula:
It is calculated as the change in consumption ($\Delta C$) divided by the change in income ($\Delta Y$): \[ \text{MPC} = \frac{\Delta C}{\Delta Y} \]
Step 4: Final Answer:
The full form of MPC is Marginal Propensity to Consume.