When a consumption schedule is plotted as a straight line, the slope of the consumption line is
A) vertical.
B) horizontal.
C) greater than the slope of the 45° line.
D) less than the slope of the 45° line.

Question

Quizplus · Accepted Answer

The slope of the consumption line, when plotted as a straight line, represents the marginal propensity to consume (MPC). It is less than the slope of the 45° line because the 45° line represents a situation where all additional income is consumed, implying an MPC of 1. The actual MPC is typically less than 1, indicating that not all additional income is consumed, hence the consumption line's slope is less than that of the 45° line.

When a Consumption Schedule Is Plotted as a Straight Line