In a graph with disposable income on the horizontal axis and consumption on the vertical axis,the intersection of the 45-degree line with the
A)Consumption function indicates zero saving.
B)Aggregate spending curve indicates full employment.
C)Full-employment output indicates equilibrium (macro).
D)Aggregate demand curve indicates equilibrium.

Question

Quizplus · Accepted Answer

The 45-degree line on a graph where disposable income is on the horizontal axis and consumption is on the vertical axis represents all points where consumption equals disposable income. When the consumption function intersects this line, it indicates that all income is being consumed, leaving zero saving.

In a Graph with Disposable Income on the Horizontal Axis