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Question
If the marginal propensity to consume is greater than marginal propensity to save, the value of the multiplier will be (Choose the correct alternative)
(a) greater than 2
(b) less than 2
(c) equal to 2
(d) equal to 5
Solution
greater than 2
When MPC >MPS, then the value of multiplier will be greater than 2 because the value of the multiplier is directly related to the value of marginal propensity to consume. They both are directly related. In other words when MPC is more, k the multiplier is more and vice versa.
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RELATED QUESTIONS
An economy is in equilibrium. From the following data calculate autonomous consumption.[4]
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|
Consumption expenditure (Rs) |
Savings (Rs) |
Income (Rs) |
Marginal propensity to Consume |
|
100 |
50 |
150 |
|
|
175 |
75 |
……. |
…… |
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250 |
100 |
……. |
…… |
|
325 |
125 |
……. |
…… |
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Choose the correct answer :
When income increases consumption and saving will _________.
Give reason or explain the following statement
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Answer the following question.
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Answer the following question.
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MPC = MPS = ?
______ buy goods and services for consumption and also supply factors of production.
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When we add up utility derived from consumption of all the units of the commodities, we get:
Identify the correctly matched pair from Column A to that of Column B:
| Column A | Column B | ||
| (1) | MPC | (a) | Ratio of Savings to Consumption |
| (2) | APC | (b) | Ratio of Consumption to Income |
| (3) | APS | (c) | Ratio of Consumption to Savings |
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An Economy is in equilibrium, calculate the Marginal Propensity to Save (MPS) from the following:
- National Income (Y) = ₹ 4,400
- Autonomous Consumption `bar("C")` = ₹ 1,000
- Investment Expenditure (I) = ₹ 70
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Reason (R): Sum of Average Propensity to Consume (APC) and Average Propensity to Save (APS) is always equal to one.
