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

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsDetermination of Income and Employment3 Marks
Question
State whether the following statements are true or false. Give reasons for your answer:
  1. When marginal propensity to consume is greater than marginal propensity to save, the value of investment multiplier will be greater than 5.
  2. The value of marginal propensity to save can never be negative.
✓

Answer

  1. True, if MPC is greater than 0.8.
Alternate Answer
False, if MPC is greater than 0.5 but not greater than 0.8
  1. True, since MPS = ΔS/ ΔY, The individual may at the most spend the entire ΔY so that ΔS= 0. So, MPS can at the most be zero.

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