On a Graph of a Consumption Function,what Is the Significance

question 132

Multiple Choice

On a graph of a consumption function,what is the significance of the 45-degree line?

• A)It connects all points where desired consumption equals desired expenditure.
• B)It connects all points where desired consumption equals actual disposable income.
• C)It shows the slope of the average consumption function,against which we measure other consumption functions.
• D)It connects all points where desired consumption equals desired saving.
• E)Desired consumption is zero at all points along the 45-degree line.

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Definitions:

Market Price

The price for an asset or service in the market at the present time.

Interest Rate Risk

The risk that changes in interest rates will negatively affect the value of an investment, especially those with fixed interest rates.

Coupon

The interest rate stated on a bond when it's issued, which represents the annual interest payment made to bondholders.

Payable Semiannually

This term indicates that a payment, often in the context of bond interest or dividends, is made twice a year.