If the MPC Increases in Value, What Will Happen to the Slope

question 137

Multiple Choice

If the MPC increases in value, what will happen to the slope of the consumption function?

• A)The slope will decrease and the consumption function will become flatter.
• B)The slope will decrease and the consumption function will become steeper.
• C)The slope will increase and the consumption function will become steeper.
• D)The slope will increase and the consumption function will become flatter.

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Definitions:

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity demanded by consumers, typically downward sloping.

Adverse Selection

A situation in insurance and markets where buyers and sellers have different information, leading to transactions where the seller is more likely to sell a low-quality product.

Insurance

A financial product offering protection against a loss, providing compensation in the event of specific financial damages or risks occurring.

Adverse Selection

A situation where asymmetric information results in high-risk individuals being more likely to purchase insurance or contracts than low-risk ones.