Which of the following is true of the autonomous investment and saving functions?
A)The autonomous investment function has a positive slope; the saving function is a horizontal line.
B)The autonomous investment function has a negative slope; the saving function has a positive slope.
C)The autonomous investment function is a horizontal line; the saving function has a positive slope.
D)Both the autonomous investment function and the saving function slope upward.
E)Both the autonomous investment function and the saving function slope downward.

Question

Quizplus · Accepted Answer

The autonomous investment function represents the level of investment that would occur even if income were zero. Therefore, it is not affected by changes in income and remains constant, indicating a horizontal line. On the other hand, saving function represents the portion of income that is not consumed and is saved instead. As income increases, saving increases as well, indicating a positive slope. Therefore, the correct option is C - the autonomous investment function is a horizontal line, and the saving function has a positive slope.

Which of the Following Is True of the Autonomous Investment