Question

Which property is true of every point on the 45° aggregate supply line?

Options

• The vertical coordinate is twice the horizontal coordinate

• The vertical coordinate equals the marginal propensity to consume

• Each point has equal horizontal and vertical coordinates

• The horizontal coordinate exceeds the vertical coordinate by \(\overline{I}\)

Answer 1

Every point on the 45° line has equal horizontal and vertical coordinates. This means the value of aggregate supply measured on the vertical axis equals the level of GDP measured on the horizontal axis, reflecting that output supplied equals GDP.