The line described by the consumption function C = a + bY_D will change its slope when A)The MPC changes. B)Consumer confidence changes. C)Disposable income changes. D)The APS changes.

Question

Quizplus · Accepted Answer

The slope of the consumption function is determined by the marginal propensity to consume (MPC), which is represented by the coefficient "b" in the equation. Therefore, any change in the MPC (such as a change in income tax rates or fiscal policy) would result in a change in the slope of the consumption function. Changes in consumer confidence, disposable income, or the average propensity to save (APS) would only shift the consumption function vertically, not change its slope.

The Line Described by the Consumption Function C = a