The Slope of the Consumption Function

question 297

Multiple Choice

The slope of the consumption function

• A) is positive and equals 1 - MPC.
• B) is negative.
• C) equals the MPC.
• D) is undefined below the 45-degree line.

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Definitions:

Par Value

The face value of a bond or the stock value stated in the corporate charter, which is often a nominal amount.

Call Premium

The extra amount over the par value that a buyer must pay to purchase a call option, which gives the right, but not the obligation, to buy an asset at a specified price.

Zero-Coupon Bond

A type of bond that is sold at a discount to its face value, pays no interest (coupon), and is redeemed at its face value at maturity.

Face Value

The nominal value or dollar value of a security stated by the issuer, also known as the "par value" especially in the context of bonds.