21.2 Equilibrium National Income FIGURE 21-3
-Refer to Figure 21-3.Consider the simplest macro model with no government and no foreign trade,and the aggregate expenditure function AE = C + I.If there was zero autonomous expenditure and the marginal propensity to consume was equal to one,then the AE function would be
A)steeper than the 45-degree line.
B)above the 45-degree line at all points.
C)below the 45-degree line at all points.
D)coincident with the 45-degree line.
E)flatter than the 45-degree line.

Question

21.2 Equilibrium National Income  FIGURE 21-3
-Refer to Figure 21-3.Consider the simplest macro model with no government and no foreign trade,and the aggregate expenditure function AE = C + I.If there was zero autonomous expenditure and the marginal propensity to consume was equal to one,then the AE function would be
A)steeper than the 45-degree line. 
B)above the 45-degree line at all points. 
C)below the 45-degree line at all points. 
D)coincident with the 45-degree line. 
E)flatter than the 45-degree line.

Quizplus · Accepted Answer

If the marginal propensity to consume is equal to one and there is zero autonomous expenditure, the AE function would be coincident with the 45-degree line, as every increase in income would lead to an equal increase in consumption, resulting in no change in savings or investment.