The 45-degree line on a graph relating consumption and income shows:

Question

all points where the MPC is constant.

all the points at which consumption and income are equal.

all points at which saving and income are equal.

the amounts households will plan to save at each possible level of income

Answer 1

The 45-degree line on a graph relating consumption and income shows all the points at which consumption and income are equal. In other words, at every point on this line, the total amount of consumption equals the total amount of income. When consumption is greater than income, households are dissaving, and when consumption is less than income, households are saving. This line serves as a reference point in analyzing consumption behavior relative to income.