If the marginal propensity to consume increases,
A) the slope of the planned expenditure line will increase.
B) the intercept of the planned expenditure line will increase.
C) the slope of the planned expenditure line will decrease.
D) the intercept of the planned expenditure line will decrease.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) represents the change in consumption resulting from a change in income. If the MPC increases, it means that consumers are likely to spend a larger portion of any additional income they receive. This behavior translates into a steeper slope of the planned expenditure line in a Keynesian cross diagram, as the line reflects how planned spending increases with income.

If the Marginal Propensity to Consume Increases