The 45-degree line in the Keynesian model represents a set of points where _____ equals _____.
A) disposable income; saving
B) disposable income; consumption
C) saving; consumption
D) saving; investment

Question

Quizplus · Accepted Answer

The 45-degree line in the Keynesian model represents a set of points where disposable income equals consumption. This is because disposable income is either consumed or saved in the Keynesian model, and at the point where the two are equal (on the 45-degree line), there is no net saving or dis-saving.

The 45-Degree Line in the Keynesian Model Represents a Set