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

Answer 1

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