When at a particular price level, aggregate demand for final goods equal aggregate supply of final goods, the final goods or product in market reaches it equilibrium. Aggregate demand for final goods consist of ex-ante consumption, ex-ante investment, government spending etc. The rate of increase in ex-ante consumption due to a unit increase in income is called marginal propensity to consume.

The sum total of MPC and MPS is always equal to :

One

The correct answer is option (3) : One

Certainly, let's delve into the explanation:

1. Marginal Propensity to Consume (MPC):- MPC represents the proportion of additional income that a consumer will spend on goods and services. Mathematically, it is expressed as the change in consumption divided by the change in income.

2 .Marginal Propensity to Save (MPS):- MPS represents the proportion of additional income that a consumer will save rather than spend. Mathematically, it is expressed as the change in saving divided by the change in income.

Since every additional rupee of income is either consumed or saved, the sum of MPC and MPS must equal 1.

MPC + MPS = 1

In summary, the relationship MPC + MPS = 1 highlights the inverse relationship between the propensity to consume and the propensity to save, as they together account for the entire additional income in the economy.