Question

Assertion (A): If the value of marginal propensity to save is 0.5, marginal propensity to consume will be equal to marginal propensity to save.

Reason (R): Sum of marginal propensity to consume and marginal propensity to save always equals to unity.

Options

• Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (А).

• Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is true, but Reason (R) is false.

• Assertion (A) is false, but Reason (R) is true.

Answer 1

Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (А).

Explanation:

The sum of MPC and MPS is always equal to 1 or Unity.

• If MPC = 0.5, then MPS will be 0.5.
• If MPC = 0.75, then MPS will be 0.25.