With consumption expenditure on the vertical axis and disposable income on the horizontal axis, the consumption function intersects the 45-degree line at $8 trillion. This result indicates that
A) consumption spending is less than $8 trillion because taxes must be paid.
B) consumption spending is $8 trillion when disposable income is $8 trillion.
C) autonomous consumption spending is $8 trillion.
D) consumption spending is more than $8 trillion because taxes have been paid.

Question

Quizplus · Accepted Answer

The point where the consumption function intersects the 45-degree line represents the point where consumption expenditure equals disposable income. Therefore, when disposable income is $8 trillion, consumption spending is also $8 trillion.

With Consumption Expenditure on the Vertical Axis and Disposable Income