Question

Graphically, the intercept of the consumption function \[C=\bar{C}+cY\] is:

Options

• \(\overline{I}\), the autonomous investment

• c, the marginal propensity to consume

• \(\overline{C}\), the autonomous consumption

• Y, the level of income

Answer 1

Graphically, the consumption function is a straight line. Its intercept on the vertical axis is \(\overline{C}\) (autonomous consumption), which is the value of consumption when income Y = 0. The slope of the consumption function is c = tan α.