Which of the following concerning the marginal propensity to consume and the consumption function is true?
I. The larger the marginal propensity to consume, the greater the amount of autonomous consumption.
II. The larger the marginal propensity to consume, the steeper the consumption function.
A) I and II are true.
B) Neither I nor II is true.
C) I is true.
D) II is true.

Question

Quizplus · Accepted Answer

The marginal propensity to consume (MPC) affects the slope of the consumption function, not the level of autonomous consumption. A larger MPC results in a steeper consumption function, as it indicates a higher increase in consumption for each additional unit of income.

Which of the Following Concerning the Marginal Propensity to Consume