Under the Keynesian theory, ‘Reference line’ is a straight line passing through the origin drawn at an angle of __________.
(Choose the correct option to fill in the blank)
Under the Keynesian theory, ‘Reference line’ is a straight line passing through the origin drawn at an angle of __________.
(Choose the correct option to fill in the blank)
Show Hint
- 25°
- 45°
- 55°
- 75°
The Correct Option is B
Solution and Explanation
In the Keynesian model, the horizontal axis shows income and the vertical axis shows consumption or planned expenditure.
The reference line is the line along which the value on both axes is equal.
Step 2: Find its angle:
A line through the origin with equal values on both axes has slope 1.
Slope = tan(angle) = 1 gives an angle of 45 degrees, so the reference line is the 45 degree line.
Step 3: Why the other options are wrong:
(A) 25 degrees: tan 25 is about 0.47, so the vertical value would be less than half of the horizontal value.
(C) 55 degrees: tan 55 is about 1.43, so the vertical value would be larger than the horizontal value.
(D) 75 degrees: tan 75 is about 3.73, which is far steeper than a line of equal values.
Final Answer:
The reference line is drawn at 45 degrees, option (B).
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