At the point where the consumption schedule intersects the 45-degree line,
A) the MPC is 1.00.
B) the APC is 1.00.
C) saving is equal to consumption.
D) the economy is in equilibrium.

Question

Quizplus · Accepted Answer

At the point where the consumption schedule intersects the 45-degree line, the APC (average propensity to consume) is equal to 1.00. This means that for every additional unit of income, all of it is being consumed by individuals in the economy. It does not necessarily mean that the economy is in equilibrium, nor does it provide information about the MPC (marginal propensity to consume) or saving.

At the Point Where the Consumption Schedule Intersects the 45-Degree