Consumption expenditures equal disposable income
A) at every point on the saving function.
B) when saving equals disposable income.
C) at every point on the 45-degree line.
D) at every point on the consumption function.

Question

Quizplus · Accepted Answer

The 45-degree line represents where consumption expenditures equal disposable income. Therefore, at every point on the 45-degree line, consumption expenditures equal disposable income. Choice A, B, and D are not necessarily true in all cases. Choice A is true only if the saving function is a straight line. Choice B is only true when saving is equal to zero. Choice D is only true at specific points on the consumption function.

Consumption Expenditures Equal Disposable Income