Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

Read the passage carefully and answer the questions based on the passage:

Calculate various parameters of Aggregate Demand, Aggregate Supply and related concepts

Income (in Crore)

Consumption (in crore)

0

50

50

75

100

100

200

150

300

200

400

250

From the given table, identify the level of income, where Average Propensity to Save (APS) becomes zero:

Options:

50

100

200

0

Correct Answer:

100

Explanation:

The correct answer is Option (2) → 100

APS = Saving / Income

Saving = Income – Consumption,

we compute APS = (Income – Consumption) / Income

Now, let’s calculate APS for each income level:

Income (₹ Crore)Consumption (₹ Crore)Saving = Income – ConsumptionAPS = Saving / Income
0 50 -50 Not defined (0/0)
50 75 -25 -25 / 50 = -0.5
100 100 0 0 / 100 = 0
200 150 50 50 / 200 = 0.25
300 200 100 100 / 300 = 0.33
400 250 150 150 / 400 = 0.375

APS becomes zero at Income = ₹100 crore