Refer to Figure A

Multiple Choice

Refer to Figure a.Assuming the solid line in the graph is a constant expected consumption line where Π (the probability of state S) = 0.50,which constant expected consumption line reflects an increase in Π?

A) The dotted line
B) The dashed line
C) An increase in Π does not result in a change in the expected consumption line.
D) A change in Π results in a parallel shift in the expected consumption line, so neither the dotted nor the dashed line reflects this change.