Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question
Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsDetermination of Income and Employment1 Mark
Question
Why can value of MPC be not greater than one?
✓
Answer
It is so because Keynes' psychological law of consumption states that when income increases, consumption also increases but at a lesser rate. So, increase in consumption is always less than increase in income, i.e.,
$\text{MPC}=\frac{\Delta\text{C}}{\Delta\text{Y}}$ is always less than one.
Need a full question paper?
Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.