Question

Answer the following questions on the basis of the given figure:

1. What does the shaded area AOB indicate? 
2. What is the significance of point B?

Answer 1

1. The shaded area AOB represents dissaving, which means savings are negative because consumption exceeds income.
2. The importance of point B, where saving is zero, is as follows:
   1. At this point, consumption is equal to income.
   2. There is no saving or investment in the economy.
   3. To the left of this point, there is dissaving (consumption is greater than income).
   4. To the right of this point, there are positive savings (income is higher than consumption).