The steeper the consumption share line, the less the amount of investment that will be crowded out from an increase in government spending.

Question

Quizplus · Accepted Answer

A steeper consumption share line indicates a higher marginal propensity to consume, which means less savings available for investment. Therefore, an increase in government spending would lead to more crowding out of investment, not less, as it competes for the limited savings.

The Steeper the Consumption Share Line, the Less the Amount