According to simple Keynesian theory, the slope of the aggregate consu

According to simple Keynesian theory, the slope of the aggregate consumption curve against income is

[amp_mcq option1=”Positive” option2=”Negative” option3=”Zero” option4=”Infinity” correct=”option1″]

This question was previously asked in

UPSC CAPF – 2019

The correct answer is A, Positive.

According to simple Keynesian theory, the consumption function is typically represented as C = a + bY, where C is consumption, a is autonomous consumption (consumption independent of income), b is the marginal propensity to consume (MPC), and Y is income. The slope of the aggregate consumption curve (plotting C against Y) is given by the coefficient of Y, which is the MPC (b).

The marginal propensity to consume (MPC) represents the proportion of an additional unit of income that is spent on consumption. It is a fundamental assumption in Keynesian economics that the MPC is positive and less than one (0 < MPC < 1). Therefore, the slope of the aggregate consumption curve is positive, indicating that as income increases, aggregate consumption also increases.

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