When the consumption function lies above the 45 -degree line, households
A) are dissaving.
B) spend on consumption a decreasing percentage of any increase in income.
C) save all of any increase in income.
D) spend on consumption an increasing percentage of any increase in income.

Question

Quizplus · Accepted Answer

When the consumption function lies above the 45-degree line, households are dissaving. This is because they are spending more than their income, which means they are borrowing money to finance their spending.

When the Consumption Function Lies Above the 45 -Degree Line