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When at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product in market reaches its equilibrium. Aggregate demand for final goods consist of ex-ante consumption, ex-ante investment, government spending etc. The rate of increase in ex-ante consumption due to a unit increase in income is called marginal propensity to consume.

MPC stands for.

Solution

Correct Option: 2

MPC stands for Marginal Propensity to Consume. As defined in the passage, it is the rate of increase in ex-ante consumption due to a unit increase in income, i.e., MPC=ΔC/ΔYMPC = \Delta C / \Delta Y.

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