State whether the following statements are true or false. Give reasons for your answer:
When marginal propensity to consume is greater than marginal propensity to save, the value of investment multiplier will be greater than 5.
The value of marginal propensity to save can never be negative.
CBSE DELHI - SET 1 2010
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True, if MPC is greater than 0.8.
Alternate Answer
False, if MPC is greater than 0.5 but not greater than 0.8
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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In an economy, the ratio of Average Propensity to Consume and Average Propensity to Save is 5 : 3. The level of income is ₹ 6,000. How much are the savings? Calculate.
Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs. 50 crores, and MPS is 0.2 and level of income (Y) is Rs. 4000 crores. State whether the economy is in equilibrium or not (cite reasons).
The saving curve of an economy makes a negative intercept of ₹ 20 crore and 10% of additional income is saved. Derive the saving and cunsumtions function.