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Home Questions 8CYHH2AQDT
Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

Which of the following statements is true in regards to marginal propensity to save?

Statement 1- According to Keynesian theory, MPS varies between 0 and 1.

Statement 2- Marginal propensity to save can never be greater than 1.

Options:

Only statement 1 is true

Only statement 2 is true

Both statement 1 and statement 2 are true

Neither statement 1 nor statement 2 is true

Correct Answer:

Both statement 1 and statement 2 are true

Explanation:

The correct answer is Option 3: Both statement 1 and statement 2 are true

Statement 1- According to Keynesian theory, MPS varies between 0 and 1. This is correct. This means that for every additional unit of income, a fraction between 0 and 1 is saved.

Statement 2- Marginal propensity to save can never be greater than 1. This is correct. If MPS were greater than 1, it would imply saving more than the additional income received, which is not feasible.

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