Along a linear consumption function
A) the average propensity to consume rises with a decrease in income.
B) the marginal propensity to consume rises with an increase in income.
C) the average propensity to consume rises with income, but the marginal propensity to consume falls with an increase in income.
D) both the average propensity to consume and the marginal propensity to consume rise with an increase in income.

Question

Quizplus · Accepted Answer

In a linear consumption function, the average propensity to consume (APC) decreases as income increases because consumption increases at a constant rate, while the marginal propensity to consume (MPC) remains constant. Therefore, with a decrease in income, the APC rises.

Along a Linear Consumption Function