A 45-degree line on a graph with expenditures,E,on the vertical axis and production,Y,on the horizontal axis,represents
A)the line of disequilibrium levels of income.
B)all possible equilibrium levels of production and expenditures.
C)some of the equilibrium levels of production and expenditures.
D)None of the above.

Question

Quizplus · Accepted Answer

A 45-degree line on a graph where expenditures (E) are on the vertical axis and production (Y) is on the horizontal axis represents all possible equilibrium levels of production and expenditures. This is because at every point along this line, the value of expenditures (E) equals the value of production (Y), indicating an equilibrium where all output produced is exactly matched by total spending in the economy.

A 45-Degree Line on a Graph with Expenditures,E,on the Vertical