If an increase in a householdʹs disposable income from $10,000 to $12,000 boosts its consumption expenditure from $8,000 to $9,000, the
A) slope of the consumption function is 0.2
B) household is dissaving.
C) slope of the consumption function is 1000.
D) slope of the consumption function is 0.5

Question

Quizplus · Accepted Answer

The slope of the consumption function is equal to the change in consumption over the change in disposable income, or (ΔC/ΔY). Therefore, the slope in this case would be (9000-8000)/(12000-10000) = 0.5.

If an Increase in a Householdʹs Disposable Income from $10,000