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Question
If increase in National Income is equal to increase in Savings, the value of Marginal Propensity to Consume would be ______.
Options
equal to unity
greater than one
less than one
equal to zero
Solution
If increase in National Income is equal to increase in Savings, the value of Marginal Propensity to Consume would be equal to zero.
Explanation:
Increase in National Income = Increase in Saving
Or
ΔY = ΔS
We Know that = ΔY = ΔC + ΔS
ΔY - ΔS = ΔC
ΔY - ΔY = ΔC
(Because here, ΔY = ΔC)
0 = ΔC
Now, MPC = `"ΔC"/"ΔY"`= `0/"ΔY"` = 0
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