Question

Identify, what does the shaded area (ΔEFG), in the given figure indicate? 

1. Consumption > Income
2. Saving = Zero (0)
3. Consumption < Income
4. Saving < Zero (0) 

Options

• I and II

• II and III

• III and IV

• I and IV

Answer 1

II and III 

• Saving = Zero (0)
• Consumption < Income

Explanation:

The area has an income curve that is higher than the consumption curve, indicating savings. Savings cannot be less than zero, indicating that II is valid. Additionally, income exceeds consumption.