Which one of the following statements about household consumption and saving is false?
A) The slope of the consumption function is the marginal propensity to consume.
B) Both the marginal propensity to consume and the marginal propensity to save are positive but less than one.
C) The marginal propensity to consume becomes negative when aggregate consumption exceeds aggregate income.
D) The slope of the savings function is the marginal propensity to save.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) does not become negative when aggregate consumption exceeds aggregate income. MPC is defined as the change in consumption for a given change in income, and it typically remains positive, indicating that as income increases, consumption also increases, though it does not imply consumption will exceed income.

Which One of the Following Statements About Household Consumption and Saving