Given the consumption schedule, it is possible to graph the relevant saving schedule by:
A)subtracting the MPC from "one" at each level of income.
B)subtracting investment from consumption at each level of GDP.
C)plotting the horizontal differences between the consumption schedule and the 45-degree line.
D)plotting the vertical differences between the consumption schedule and the 45-degree line.

Question

Quizplus · Accepted Answer

The saving schedule can be obtained by subtracting the consumption expenditure from income at each level of GDP. Since the 45-degree line represents the income-consumption identity, the vertical difference between the consumption schedule and the 45-degree line gives the level of saving at each level of income. Therefore, option D is the correct choice.

Given the Consumption Schedule, It Is Possible to Graph the Relevant