"Men are disposed, as a rule, and on the average, to increase their consumption as their income increases, but not by as much as the increase in their incomes." Which of the following is consistent with this statement by J.M.Keynes?
A)The slope of the consumption function is positive and less than 1.
B)The slope of the consumption function is greater than that of the 45-degree line.
C)The slope of the consumption function is negative.
D)The slope of the consumption function is equal to 1.

Question

Quizplus · Accepted Answer

The statement suggests that there is a positive relationship between income and consumption, which is captured by the positive slope of the consumption function. However, the statement also suggests that this relationship is less than proportional, meaning the increase in consumption is not as much as the increase in income. This is captured by a slope that is less than 1 (but still positive). Choice A is the only one that captures both aspects of the statement. Choice B suggests a slope that is greater than 1, which would imply that consumption increases more rapidly than income, contradicting the statement. Choice C suggests a negative slope, which would imply that consumption decreases as income increases, also contradicting the statement. Choice D suggests a slope of 1, which would imply a proportional relationship between income and consumption, also contradicting the statement.

"Men Are Disposed, as a Rule, and on the Average