If the consumption function coincides with the 45- degree line, then we know that
A)the marginal propensity to consume is greater than one.
B)desired saving is zero at all levels of disposable income.
C)desired consumption is constant at all levels of disposable income.
D)desired consumption equals desired saving at all levels of disposable income.
E)the marginal propensity to consume is less than one.

Question

Quizplus · Accepted Answer

When the consumption function coincides with the 45-degree line, it means that all disposable income is consumed, leaving no room for saving, hence desired saving is zero at all levels of disposable income.

If the Consumption Function Coincides with the 45- Degree Line