When the consumption function lies above the 45- degree line, households
A) save all of any increase in income.
B) spend on consumption an increasing percentage of any increase in income.
C) spend on consumption a decreasing percentage of any increase in income.
D) are dissaving.

Question

Quizplus · Accepted Answer

When the consumption function is above the 45-degree line, it indicates that households are spending more than their income, which means they are dissaving.

When the Consumption Function Lies Above the 45- Degree Line