The U.S. consumption function
A) has a positive slope.
B) has shifted upward over time.
C) has a slope of about 0.9.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

All of the statements are correct. The consumption function in the U.S. has a positive slope, which means that as income rises, so does consumption. Over time, the consumption function has shifted upward, suggesting that Americans are spending a greater percentage of their income on consumption. Empirical evidence suggests that the slope of the consumption function is approximately 0.9, which means that a $1 increase in income leads to a $0.9 increase in consumption.

The U.S. Consumption Function