Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

Read the following statements -
Assertion (A) and Reason (R):
Assertion (A) Even if income is 0, some consumption still takes place.
Reason(R) Marginal propensity to consume is the change in consumption per unit change in income.
From the given alternatives choose the correct one:

Options:

Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Assertion (A) is true but Reason (R) is false.

Assertion (A) is false but Reason (R) is true.

Correct Answer:

Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation of Assertion (A).

Explanation:

Even if income is 0, some consumption still takes place. This is the autonomous consumption, which is independent of income. For example: basic necessities of life like food, clothing etc.

C = c + bY,

Here "c" is the autonomous consumption.