ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Mathematical Relationship between MPC and MPS! The sum of MPC and MPS is equal to unity (i.e., MPC + MPS = 1). For sake of convenience, suppose a man’s income Increases by Rs 1. If out of it, he spends 70 paise on consumption (i.e., MPC = 0.7) and saves 30 paise (i.e., MPS = 0 3) then MPC + MPS = 0.7 + 0.3 = 1.

Detailed explanation-2: -MPS + MPC = 1 Since income is equal to the summation of consumption and saving, change in income also equals the sum of the change in consumption and change in saving. Therefore, the sum of MPC and MPS is equal to one.

Detailed explanation-3: -The marginal propensity to consume (MPC) is the flip side of MPS. Economic theory tends to support that as income increases, so too does spending and consumption. Therefore, the MPC and MPS have a inversely proportional relationship with each other.

Detailed explanation-4: -MPC + MPS = 1, it can never be greater than or less than 1. Q.

Detailed explanation-5: -Answer and Explanation: The answer is D. The sum of the MPC and the MPS is always equal to 1, ignoring taxes and imports. Marginal propensity to save (MPS) refers to the proportion of extra income that consumers save, and it is related to the marginal propensity to consume.