-Refer to the above figure. If the MPC is unchanged and level of autonomous consumption increases, what occurs?
A) Line EBD will shift up.
B) Line ABC will drop down.
C) Line ABC shifts up.
D) Line EBD rotates and becomes steeper.

Question

-Refer to the above figure. If the MPC is unchanged and level of autonomous consumption increases, what occurs?
A) Line EBD will shift up. 
B) Line ABC will drop down. 
C) Line ABC shifts up. 
D) Line EBD rotates and becomes steeper.

Quizplus · Accepted Answer

When the level of autonomous consumption increases, the entire consumption function (Line ABC) shifts upward because for any level of income, consumption is higher. This does not affect the slope of the line (MPC), so Line EBD, which represents the MPC, remains unchanged in slope.

-Refer to the Above Figure