In Figure 9.2,if the consumption function shifts from C₁ to C_2, it can be determined that the A)MPC and APC have increased at each income level. B)MPC and APC have decreased at each income level. C)MPC has increased and the APC has stayed the same at each income level. D)APC has increased and the MPC has stayed the same at each income level.

Question

Quizplus · Accepted Answer

When the consumption function shifts upward, it means that at any given level of income, people are consuming more than before. This indicates an increase in both the marginal propensity to consume (MPC) and the average propensity to consume (APC) at each income level. Therefore, the correct choice is A.