Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

Which of the following properties cannot be linked with Average propensity to save?

  • Average propensity to save can never be zero at any point of income.
  • Average propensity to save can never by equal to 1.
  • APS rises with the rise in income i.e. they have a negative relation with each other.
  • Average propensity to save can never be negative
Options:

1, 2 and 4

1,2 and 3

2, 3 and 4

1,3 and 4 

Correct Answer:

1,3 and 4 

Explanation:

The correct answer is Option 4: 1, 3, and 4.

Here's why the other options are incorrect:

1. Average propensity to save can never be zero at any point of income: This is incorrect. If someone spends their entire income and saves nothing, the average propensity to save (APS) would be zero.

2. Average propensity to save can never be equal to 1: This is also correct because there is always a part of income that is utilized for consumption. An average propensity to save of 1 would mean that individuals are saving all of their disposable income, leaving none for consumption, which is unlikely in practical scenarios.

3. APS rises with the rise in income i.e. they have a negative relation with each other. This is also incorrect. APS has a positive relationship with income i.e., with rise in income the APS increases as people tend to save more with rise in income.

4. Average Propensity to save can never be negative: This is also incorrect. APS can be negative due to autonomous consumption i.e. dis-savings.