Estimate of the marginal propensity to consume

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(More difficult) Between 2007 and 2008, real disposable income (in 2005 dollars) barely increased at all, owing to a recession. (It rose from $9,861 billion to $9,913 billion.) Use the data on real consumption expenditures given on the inside back cover of this book to compare the change in C to this $52 billion change in DI. Explain why dividing the two does not give a good estimate of the marginal propensity to consume.

Reference no: EM131353965

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