Let's consider this economy:(1)AD=C+I (2)C=100+0.8Y (3)I=200 What is the marginal propensity to consume?

1. Break Down the Problem

To find the marginal propensity to consume (MPC), we will refer to the consumption function provided. The consumption function is a mathematical expression that shows how a change in disposable income (Y) leads to a change in consumption (C). The function is given as: $C = 100 + 0.8Y$

2. Relevant Concepts

The marginal propensity to consume (MPC) measures the proportion of additional income that is spent on consumption rather than being saved. It can be derived from the consumption function, where the coefficient of Y represents the MPC.

3. Analysis and Detail

From the consumption function: $C = 100 + 0.8Y$ Here, $0.8$ is the coefficient associated with $Y$. This coefficient directly represents the MPC.

4. Verify and Summarize

Since the consumption function is given directly, and we have identified the coefficient that represents the MPC, we can conclude that the calculation is verified and correct.

Final Answer

The marginal propensity to consume (MPC) is $0.8$.