The marginal propensity to consume
A)is equal to zero when disposable income equals consumption expenditure.
B)is equal to 1 minus the slope of the saving function.
C)is negative when saving is positive.
D)increases as the economy moves upward along the consumption function.
E)is greater than the slope of the 45-degree line.

Question

Quizplus · Accepted Answer

The marginal propensity to consume is defined as the change in consumption expenditure resulting from a change in disposable income. Therefore, it is equal to the slope of the consumption function. Since saving is the difference between disposable income and consumption, the slope of the saving function can be expressed as (1 - marginal propensity to consume). So, the marginal propensity to consume is equal to 1 minus the slope of the saving function.

The Marginal Propensity to Consume