Assertion (A): A fall in the mpc makes the aggregate demand line flatter.
Reason (R): The slope of the aggregate demand line is equal to the mpc.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both (A) and (R) are true and (R) is the correct explanation of (A).
Assertion (A): A fall in the mpc makes the aggregate demand line flatter. — True. A decline in the mpc reduces the slope of AD, so the line swings down.
Reason (R): The slope of the aggregate demand line is equal to the mpc. — True. AD is parallel to the consumption function, so both have slope c.
A is about a change in the AD line. R is about what its slope is.
Why R explains A? The slope of the AD line is the mpc. So when the mpc falls, the slope falls, and the line becomes flatter. A follows directly from R.
NCERT (2026-27): “Aggregate Demand: Graphical Representation The Aggregate Demand function shows the total demand (made up of consumption + investment) at each level of income. Graphically it means the aggregate demand function can be obtained by vertically adding the consumption and investment function. … The aggregate demand function is parallel to the consumption function i.e., they have the same slope c. It may be noted that this function shows ex ante demand.” “Paradox of Thrift … When A changes the line shifts upwards or downwards in parallel. When c changes, however, the line swings up or down. An increase in mps, or a decline in mpc, reduces the slope of the AD line and it swings downwards. We depict the situation in Fig. 4.8.” |