If the consumption function lies below the 45- degree line, then saving at these levels of disposable income will
A) equal zero.
B) be positive.
C) be negative.
D) be some amount that cannot be determined without additional information.

Question

Quizplus · Accepted Answer

If the consumption function lies below the 45-degree line, it means that at each level of disposable income, consumption is less than disposable income. This implies that individuals are saving a portion of their disposable income, hence, saving will be positive.

If the Consumption Function Lies Below the 45- Degree Line