Question

The slope of the consumption function is given by:

Options

• \(\overline{C}\) = tan α

• c = tan α

• c = tan θ where θ is measured from the vertical axis

• \(\overline{C}\) / Y

Answer 1

The consumption function \[C=\bar{C}+cY\] is a straight line with intercept \(\overline{C}\) and slope c. The slope of the consumption function is c = tan α, where α is the angle the consumption line makes with the horizontal axis.