Refer to the information provided in Figure 8.2 below to answer the questions that follow. Figure 8.2 -Refer to Figure 8.2. Suppose Jerry's MPC increases, and the vertical intercept of the consumption function does not change. At income Y₁, Jerry's A) consumption will be greater than his income. B) consumption will be less than his income. C) saving will be zero. D) all of the above

Question

Quizplus · Accepted Answer

If Jerry's marginal propensity to consume (MPC) increases without a change in the vertical intercept of the consumption function, it means that for any given level of income, Jerry will consume a larger portion of it. At income Y, if the MPC increases, Jerry's consumption curve will become steeper, indicating he will consume more out of his income. However, without knowing the exact position of the consumption curve relative to the 45-degree line (which represents where consumption equals income) at income Y, we cannot definitively say his consumption will be greater than, equal to, or less than his income, nor can we accurately state the status of his savings. The correct interpretation hinges on understanding that a higher MPC leads to a higher consumption level for any given income, but the specific outcomes in terms of comparison to income or savings depend on additional information not provided in the question.

Refer to the Information Provided in Figure 8