With reference to the consumption function, the 45-degree line represents
A) the planned savings function.
B) all points at which planned real saving is equal to real disposable income.
C) all points at which planned real saving is equal to planned real consumption spending.
D) all points at which real disposable income is equal to real consumption spending.

Question

Quizplus · Accepted Answer

The 45-degree line represents all points at which real disposable income is equal to real consumption spending. This is because the line represents the equality of the two variables, with each point on the line representing a balance between saving and consumption. Points above the line indicate that consumption spending exceeds disposable income, while points below the line indicate that disposable income exceeds consumption spending. Therefore, the correct answer is D.

With Reference to the Consumption Function, the 45-Degree Line Represents