On a graph of a consumption function,what is the significance of the 45-degree line?
A)It connects all points where desired consumption equals desired expenditure.
B)It connects all points where desired consumption equals actual disposable income.
C)It shows the slope of the average consumption function,against which we measure other consumption functions.
D)It connects all points where desired consumption equals desired saving.
E)Desired consumption is zero at all points along the 45-degree line.

Question

Quizplus · Accepted Answer

The 45-degree line represents the points where actual disposable income equals desired consumption. This means that any point on the line represents an equilibrium point where consumption and income are equal. Points above the line represent a situation where consumption is greater than income, and points below the line represent a situation where income is greater than consumption. Therefore, the 45-degree line is a useful tool for understanding the relationship between consumption and income in an economy.

On a Graph of a Consumption Function,what Is the Significance