In the Keynesian Cross Diagram the 45 Degree Line

question 42

Multiple Choice

In the Keynesian cross diagram the 45 degree line

• A) has no economic significance.
• B) connects all points where there is full employment in the economy.
• C) connects all points where consumption spending would be equal to national income.
• D) connects all points where spending on imports is equal to the value of export spending.

---

Definitions:

MSB

Marginal Social Benefit, which refers to the additional benefit society gains from consuming one more unit of a good or service.

MSC

MSC stands for Marginal Social Cost, which is the total cost to society of producing an additional unit of a good or service, including both private and external costs.

Coase Theorem

An economic theory that suggests that if property rights are clearly defined and transaction costs are negligible, private negotiations will lead to the efficient resolution of disputes regardless of the initial allocation of rights.

Coase Theorem

A theory suggesting that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.