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.

Question

Quizplus · Accepted Answer

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 = ΔC/ΔY

Given ΔY = -$40 billion and ΔC = -$30 billion,

slope of consumption function = -$30 billion / -$40 billion = 0.75

If Disposable Income Falls by $40 Billion and Consumption Falls