In a diagram with the consumption function, the 45- degree line indicates all points where
A) consumption expenditures and saving are equal.
B) saving and investment are equal.
C) saving and disposable income are equal.
D) consumption expenditures and disposable income are equal.

Question

Quizplus · Accepted Answer

The 45-degree line on a consumption function diagram represents all points where consumption expenditures and disposable income are equal, meaning that consumers are spending all of their disposable income. This line is created by plotting points where the values of consumption expenditures and disposable income are equal, resulting in a straight line at a 45-degree angle.

In a Diagram with the Consumption Function, the 45- Degree