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Why is the MPC of developing countries more as compared to developed countries? |
Developing countries mostly have high population leading to increased MPC Developing countries income generation is more than that of developed countries Developing countries spend more on the basic necessities None of the above |
Developing countries spend more on the basic necessities |
MPC refers to the ratio of change in consumption expenditure to change in income. It lies between 0 and 1. The developing country's MPC is high because these countries spend more on the basic necessities of individual. This, justification goes well with the fact that poor person's tendency is high as compared to a rich person to spend. The APC also keeps falling with increase in income due to the fact that people tend to save more with rise in income. |
