When the consumption schedule lies above the 45-degree reference line, consumption spending is _____ than income and saving is _____.
A) greater; positive
B) less; positive
C) greater; negative
D) less; negative

Question

Quizplus · Accepted Answer

When the consumption schedule lies above the 45-degree reference line, it means that consumption spending is higher than income, which results in negative saving. Option A and B both have positive saving, which is not the case when consumption is higher than income. Option D has the correct direction for saving, but it implies that consumption is less than income, which is the opposite of what is being described in the question.

When the Consumption Schedule Lies Above the 45-Degree Reference Line