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Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsDetermination of Income and Employment1 Mark
Question
Giving reasons, state whether the following statements are true or false:
Average propensity to save is always greater than zero.
✓

Answer

False.

Explanation:

APS is not always greater than zero, but it can be negative. This is so at very low level of income, when consumption expenditure exceeds income. E.g. at an income level of ₹ 100, if the consumption expenditure is ₹ 120, the saving is (-20).

$\therefore\text{APS}=\frac{\text{S}}{\text{Y}}=\frac{-20}{100}=-0.2$

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