The expenditure line slopes upward because consumption depends positively on income. As income increases, people tend to spend more, which leads to a higher level of consumption. Therefore, the expenditure line is less steep than the 45-degree line because people tend to save some of their income as their income increases.

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The Expenditure Line

Question 109

Multiple Choice

The expenditure line

A) is steeper than the 45-degree line.
B) slopes upward because consumption depends positively on income.
C) slopes upward because the MPC is less than 1.
D) slopes upward because consumption and investment depend positively on income.
E) shows the relationship between consumption spending and income.

Correct Answer: