Question

Linear consumption function implies ______.

Options

• consumption changes at a constant rate as income changes

• consumption does not change with change in income

• consumption changes at an increasing rate as income increases

• consumption changes at a decreasing rate as income increases

Answer 1

Linear consumption function implies consumption changes at a constant rate as income changes.

Explanation:

In a linear function [C = a + cY], the slope c is constant, so consumption changes by the same proportion of every change in income.