On a graph of a consumption function, what is the significance of the 45- degree line?
A)Desired consumption is zero at all points along the 45- degree line.
B)It shows the slope of the average consumption function, against which we measure other consumption functions.
C)It connects all points where desired consumption equals desired saving.
D)It connects all points where desired consumption equals desired expenditure.
E)It connects all points where desired consumption equals actual disposable income.

Question

Quizplus · Accepted Answer

The 45-degree line on a consumption function graph represents points where desired consumption equals actual disposable income, indicating that all income is spent.

On a Graph of a Consumption Function, What Is the Significance