Question

The consumption function curve is

• A. Upward sloping
• B. Downward sloping
• C. Parallel to the x-axis
• D. Parallel to the y-axis

Hint:

C = a + bY with MPC (b) between 0 and 1 gives a positively sloped line.

Answer 1

The Correct Option is A

Step 1: Understanding the Question:
The Keynesian consumption function is written C = a + bY, where a is autonomous consumption and b is the marginal propensity to consume (MPC), with 0 < b < 1.

Step 2: Why option A is correct:
Since b (the slope) is positive, consumption C rises as income Y rises — the curve therefore slopes upward from left to right, starting from a positive intercept 'a' on the C-axis.

Step 3: Why option B is wrong:
A downward slope would mean consumption falls as income rises, which contradicts the basic psychological law that consumption increases with income.

Step 4: Why option C is wrong:
A line parallel to the x-axis would mean consumption never changes with income at all (MPC = 0), which is not how the standard consumption function is drawn.

Step 5: Why option D is wrong:
A line parallel to the y-axis is not even a function of income (it would mean one income level supports every possible consumption), so it cannot represent C = a + bY.

Final Answer:
The consumption function curve is upward sloping.