On a diagram of the consumption function and the 45-degree line,saving at each level of disposable income is the vertical distance
A)from the horizontal axis to the intersection point of the consumption line and the 45-degree line.
B)from the horizontal axis to the 45-degree line.
C)between the consumption and the 45-degree lines.
D)from the horizontal axis to where the consumption line intersects the vertical axis.

Question

Quizplus · Accepted Answer

The vertical distance between the consumption function and the 45-degree line represents saving at each level of disposable income, as the 45-degree line indicates where all income is consumed (consumption equals income), and any deviation below this line is savings.

On a Diagram of the Consumption Function and the 45-Degree