The vertical distance between the consumption function and the 45° line measures
A)disposable income.
B)consumption.
C)saving or dissaving.
D)the marginal propensity to consume.
E)the marginal propensity to save.

Question

Quizplus · Accepted Answer

The consumption function shows the relationship between income and consumption, while the 45° line represents the income level where income equals expenditure. The vertical distance between these two lines represents saving or dissaving, as it shows the difference between income and consumption expenditure. Therefore, the best choice is C.

The Vertical Distance Between the Consumption Function and the 45°