When graphing the consumption function, we include a 45-degree reference line. What is TRUE at the points at which the consumption function crosses this line?
A) Planned real saving is zero.
B) Planned real consumption spending is zero.
C) Real disposable income is zero.
D) Real GDP is zero.

Question

Quizplus · Accepted Answer

The 45-degree reference line on a consumption function graph represents where consumption equals income. At the points where the consumption function crosses this 45-degree line, planned real saving is zero because all income is being consumed, leaving no income for saving.

When Graphing the Consumption Function, We Include a 45-Degree Reference