Economics For Today

10th Edition
Publisher: Cengage Learning
ISBN: 9781337613040



Economics For Today

10th Edition
Publisher: Cengage Learning
ISBN: 9781337613040
Chapter 18, Problem 17SQ
Textbook Problem

As shown in Exhibit 8, the 45° line represents

  1. a. autonomous consumption.
  2. b. real consumption spending.
  3. c. real disposable income.
  4. d. all points where real consumption equals real disposable income.

To determine

The 45-degree line in the exhibit.

Explanation of Solution

The consumption expenditure is the expenditure made by the consumers in the economy. The consumption expenditure has two parts: the autonomous consumption and the induced consumption. The autonomous consumption is the consumption that is not associated with the level of disposable income. The induced consumption is associated with the disposable income. The consumption expenditure of the economy is illustrated as follows:

Option (d):

The consumption function in the consumption disposable income diagram indicates the relation between the two. The consumption function has both the autonomous part as well as the induced part. The 45-degree line on the other hand illustrates all the points where the real consumption spending equals the real disposable income. Thus, option 'd' is the correct answer.

Option (a):

The autonomous consumption is the level of consumption that is not related to the level of disposable income in the economy...

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Chapter 18 Solutions

Economics For Today
Show all chapter solutions

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions add
Why is productivity important?

Principles of Microeconomics (MindTap Course List)

CAPM AND REQUIRED RETURN Calculate the required rate of return for Manning Enterprises assuming that investors ...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Why must employers maintain employees individual earnings records?

College Accounting (Book Only): A Career Approach