Along a linear consumption function,
A)the average propensity to consume falls with an increase in income.
B)the marginal propensity to consume rises with an increase in income.
C)the average propensity to consume rises with income, but the marginal propensity to consume falls with an increase in income.
D)both the average propensity to consume and the marginal propensity to consume rise with an increase in income.

Question

Quizplus · Accepted Answer

In a linear consumption function, the marginal propensity to consume (MPC) is constant, while the average propensity to consume (APC) decreases as income increases because the fixed component of consumption becomes a smaller proportion of total income.

Along a Linear Consumption Function