The graph shows the consumption line, the saving line and the 45° line. Which statement is true at an income of ₹160 crore? The consumption line C = 40 + 0.75Y, the saving line S = −40 + 0.25Y and a dashed 45° line. C meets the 45° line at B (income ₹160 crore), exactly where S crosses the income axis. At an income of ₹400 crore, C is ₹340 crore and S is ₹60 crore.

The graph shows the consumption line, the…

The graph shows the consumption line, the saving line and the 45° line.

Question 45

MediumOriginal question

The graph shows the consumption line, the saving line and the 45° line. Which statement is true at an income of ₹160 crore?

The consumption line C = 40 + 0.75Y, the saving line S = −40 + 0.25Y and a dashed 45° line. C meets the 45° line at B (income ₹160 crore), exactly where S crosses the income axis. At an income of ₹400 crore, C is ₹340 crore and S is ₹60 crore.

C meets the 45° line and S crosses the income axisCorrect answerYour answerC is at its highest and S at its lowestCorrect answerYour answerC and S are equalCorrect answerYour answerC is zero and S equals incomeCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

At B, C = Y = 160, so S = Y − C = 0.
The break-even income is the same point on both graphs.

Concept: C and S together
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe saving function and break-even

Practise this chapter →

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

Practise this chapter →

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

The graph shows the consumption line, the saving line and the 45° line.

Question 45

Explanation