Question

The expenditure line

A. is steeper than the 45-degree line.
B. slopes upward because consumption depends positively on income.
C. slopes upward because the MPC is less than 1.
D. slopes upward because consumption and investment depend positively on income.
E. shows the relationship between consumption spending and income.

Answer 1

B. slopes upward because consumption depends positively on income.

Step-by-step explanation:

Expenditure line is flatter than a 45 degree line. this is because for every increase in disposable income only a fixed proportion of this increase is consumed which is measured by MPC. Consumption and income are positively related and so aggregate expenditure line has a positive slope.