The vertical distance between the 45-degree line and the consumption line represents
A) the difference between consumption expenditure and investment.
B) saving or dissaving.
C) investment.
D) total consumption expenditure.

Question

Quizplus · Accepted Answer

The distance between the 45-degree line and the consumption line represents saving or dissaving because it shows how much individuals are either saving or spending beyond their income. If the consumption line is above the 45-degree line, it means that individuals are spending more than they are earning, resulting in dissaving. If the consumption line is below the 45-degree line, it means that individuals are saving more than they are spending, resulting in saving.

The Vertical Distance Between the 45-Degree Line and the Consumption