When drawn on a graph with Y along the horizontal axis and PE along the vertical axis, the line showing planned expenditure rises to the:
A) right with a slope less than one.
B) right with a slope greater than one.
C) left with a slope less than one.
D) left with a slope greater than one.

Question

Quizplus · Accepted Answer

Planned expenditure typically increases with an increase in income (represented by Y on the horizontal axis), indicating a positive relationship. The slope is less than one because the marginal propensity to consume (the slope of the planned expenditure line) is between 0 and 1, meaning people spend a fraction of additional income rather than the entire increase.

When Drawn on a Graph with Y Along the Horizontal