The Slope of the Consumption Function Is

question 150

Multiple Choice

The slope of the consumption function is

• A) equal to the MPC.
• B) equal to 1.
• C) vertical at the full employment level of income.
• D) perfectly horizontal at the equilibrium level.

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Definitions:

Earnings Rate

The rate at which an individual or corporation is taxed or the speed at which an investment grows.

Present Value Index

A ratio used in capital budgeting to evaluate the profitability of investments by comparing the present value of future cash flows to the initial investment cost.

Compound Interest

Interest that is computed on both the initial amount of the deposit or loan and on the interest that has been added to that principal over past periods.

Desired Rate of Return

The minimum percentage return an investor expects to achieve by investing in a particular asset.