Which of the Following Is True of Long-Run Consumption Functions

question 27

Multiple Choice

Which of the following is true of long-run consumption functions?

• A)Autonomous consumption is equal to zero in the long-run.
• B)The long run consumption functions are steeper than short run consumption functions.
• C)The marginal propensity to consume for the long run consumption function is almost equal to zero.
• D)The autonomous consumption is negative in long run consumption functions.
• E)The long run consumption function is represented by a straight line parallel to the horizontal axis.

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Definitions:

Demand Curve

A graphical representation showing the relationship between the price of a good and the quantity demanded by consumers at those prices.

Increase in Demand

describes a situation where there is a higher quantity of a product or service desired by consumers at a given price level.

Inferior Good

A type of good for which demand decreases as the income of individuals increases, inversely related to income levels.

Substitutes

Goods or services that can be used in place of each other, where an increase in the price of one leads to an increase in the demand for the other.