Which of the following concerning the marginal propensity to consume and the consumption function is TRUE?
I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption.
II. The larger the marginal propensity to consume, the steeper the consumption function.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) measures the change in consumption resulting from a change in income. A larger MPC means that for any increase in income, consumption will increase by a larger amount, making the consumption function steeper. Autonomous consumption is the part of consumption that does not depend on income, so the size of the MPC does not directly affect the amount of autonomous consumption.

Which of the Following Concerning the Marginal Propensity to Consume