ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The correct answer is ‘MPC + MPS = 1’. Marginal Propensity to Save (MPS) is measured as the ratio of change in savings to change in income. Marginal Propensity to Consume (MPC) is the proportion of an increase in income that gets spent on consumption.

Detailed explanation-2: -MPC can never be more than 1. MPC+MPS=1. Hence, option A is correct.

Detailed explanation-3: -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-4: -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.

Detailed explanation-5: -How are MPC and MPS calculated? The marginal propensity to consume (MPC) is found by dividing the change in spending on consumption by the change in someone’s income. The marginal propensity to save (MPS) is similarly found by dividing the change in saving by the change in income.