In the question given below there are 2

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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

In the question given below there are 2 statements marked as Assertion (A) and Reason (R). Choose the correct alternative from the following options.

Assertion (A)- Marginal propensity to consume can never be zero.

Reason (R)- Even at zero level of income there is a certain amount of consumption that takes place.

Options:

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

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

(A) Is true but (R) is false.

(A) Is false but (R) is true.

Correct Answer:

(A) Is false but (R) is true.

Explanation:

The corrrect answer is Option 4: (A) Is false but (R) is true.

Explanation:

Assertion (A) is false because the marginal propensity to consume (MPC) can be zero. MPC measures the additional consumption out of additional income. If all additional income is saved, MPC could indeed be zero.
Reason (R) is true because even at zero income, people may consume a certain amount (called autonomous consumption), which does not depend on income. This is typically financed through savings or borrowing.