If we graph the consumption function such that it cuts the vertical axis at a point above the origin,this is because we are assuming that
A) the MPC is positive.
B) the MPS is positive.
C) autonomous consumption is positive.
D) induced consumption is positive.

Question

Quizplus · Accepted Answer

Autonomous consumption represents the level of consumption that exists even if income is zero. The fact that the function cuts the vertical axis at a point above the origin implies that there is positive autonomous consumption, which means that even when income is zero, individuals have a minimum level of consumption. This choice is different from the other options because it directly relates to the position of the consumption function on the vertical axis, as opposed to the slope or the direction of the function.

If We Graph the Consumption Function Such That It Cuts