Answer to Question #134298 in Macroeconomics for lesego

Question

If the marginal propensity to consume increases:
(1) The slope of the consumption function will be steeper.
(2) There will be a movement from left to right along the consumption function.
(3) The consumption function will shift parallel upwards.
(4) The consumption function will shift parallel downwards

Answer 1

 The slope of the consumption function will be steeper.

consumer function =a +b* Yd

This suggests consumption is primarily determined by the level of disposable income (Yd). Higher Yd leads to higher consumer spending.

This model suggests that as income rises, consumer spending will rise. However, spending will increase at a lower rate than income.

Hence, The slope of the consumption function will be steeper.