2. Define marginal propensity to consume (MPC) and the multiplier (M).

3. Each term (3 months) the current group of economics students completed a questionnaire as to how much they would spend on new purchases compared to how much they would save/pay off bills, if they suddenly and unexpectedly received a check for $1,000. The average MPC is shown in the table below.

Month in which student poll was taken

Average of students' responses as MPC

March

0.41

June

0.30

September

0.22

December

0.56

a. What do these MPC's imply about the students' thinking over the course of the year?

b. What is likely happening in the economy during the same period of time?