The figure given below represents the consumption function of a country.?Figure 9.3

-Refer to Figure 9.3. The savings function of the country will have a positive intercept at all income levels _____.
A) less than $200
B) greater than $200
C) less than $600
D) greater than $400
E) less than $800

Question

The figure given below represents the consumption function of a country.?Figure 9.3
 
-Refer to Figure 9.3. The savings function of the country will have a positive intercept at all income levels _____.
A) less than $200 
B) greater than $200 
C) less than $600 
D) greater than $400 
E) less than $800

Quizplus · Accepted Answer

The savings function of the country will have a positive intercept at income levels greater than $400. This is because the consumption function crosses the 45-degree line (representing equilibrium between consumption and income) at an income level greater than $400. At income levels below $400, consumption exceeds income, and hence savings are negative. Therefore, the positive intercept of the savings function will occur at an income level greater than $400.

The Figure Given Below Represents the Consumption Function of a Country.?Figure