Consider the following statements.

A. APC =0 when APS =1

B. Margin requirement is one of the monetary tools.

C. RBI will increase SLR in case of underemployment equilibrium.

D. At Break Even Point, APC = 1

E. Government reduces CRR to overcome the problem of deficient demand.

Choose the correct answer from the options given below :

B, D and E only

The correct answer is option (2) : B, D and E only

A. APC =0 when APS =1 : This is incorrect.

Average Propensity to Consume (APC): The proportion of income spent on consumption. It can never be 0 because people will always spend at least some portion of their income.
Average Propensity to Save (APS): It is the proportion of income saved. APS can never by one as savings can never be equal to income.

B. Margin requirement is one of the monetary tools. This is correct. The margin requirement is a qualitative tool used by central banks to regulate credit availability. Margin requirements refer to the minimum percentage of the purchase price of securities that must be paid in cash by the investor, with the remainder being financed through a loan from the broker.

C. RBI will increase SLR in case of underemployment equilibrium. This is incorrect. SLR (Statutory Liquidity Ratio) is the percentage of deposits that banks must maintain in liquid assets (including cash). SLR (Statutory Liquidity Ratio) is often increased by the RBI to control inflation and liquidity in the economy. In A situation where there is unemployment but also excess capacity in the economy (resources not fully utilized), the central bank might actually decrease SLR to encourage banks to lend more and stimulate economic activity.

D. At Break Even Point, APC = 1: This is correct. At the break-even point, APC is equal to 1. Average Propensity to Consume (APC) refers to the ratio of consumption expenditure to the corresponding level to consume. At break even point, consumption is equal to national income. So, APC = 1

E. Government reduces CRR to overcome the problem of deficient demand. : This is true. Cash Reserve Ratio (CRR) is reduced by the government to increase liquidity in banks, encouraging them to lend more and stimulate demand in the economy.

******