The sensitivity parameter in the consumption function that measures how sensitive consumption is to changes in consumer confidence is referred to as the marginal propensity to consume.

a. True
b. False

The Sensitivity Parameter that measures the sensitivity of changes in consumption to changes in consumer confidence is not the Marginal Propensity to Consume.

The Marginal Propensity to Consume rather measures what proportion of additional income is spent on consumption. For example, if you earn an extra $50 this month and you spend $40, the Marginal Propensity to Consume is 40/50 = 0.8.

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The sensitivity parameter in the consumption function that measures how sensitive consumption is to changes in consumer confidence is referred to as the marginal propensity to consume. a. True b. False

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The sensitivity parameter in the consumption function that measures how sensitive consumption is to changes in consumer confidence is referred to as the marginal propensity to consume.

a. True
b. False