If disposable income falls by $40 billion and consumption falls by $30 billion, then the slope of the consumption function is
A)1.33.
B)0.75.
C)0.4.
D)0.3.
E)0.25.

Question

Quizplus · Accepted Answer

The slope of the consumption function represents the change in consumption for a unit change in disposable income. 
Therefore, the slope of the consumption function is given by the ratio of the change in consumption to the change in disposable income:
Slope of consumption function = Change in consumption / Change in disposable income 
= (-30) / (-40) 
= 0.75 
Thus, the correct answer is (B).

If Disposable Income Falls by $40 Billion and Consumption Falls