Match List-I (symbol used in the model) with List-II (what it stands for):
| List-I | List-II | ||
|---|---|---|---|
| (A) | C̄ | (I) | Autonomous investment |
| (B) | c | (II) | Marginal propensity to save, equal to 1 – c |
| (C) | Ī | (III) | Autonomous consumption |
| (D) | s | (IV) | Marginal propensity to consume |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (A) - (III), (B) - (IV), (C) - (I), (D) - (II)
These are the symbols of the consumption and investment functions.
| List-I | List-II | Reason |
|---|---|---|
| (A) C̄ | (III) Autonomous consumption | C̄ is the consumption that is independent of income. |
| (B) c | (IV) Marginal propensity to consume | c is the rise in consumption per rupee of extra income. |
| (C) Ī | (I) Autonomous investment | Ī is investment given from outside the model. |
| (D) s | (II) Marginal propensity to save, equal to 1 – c | s is the change in saving per unit change in income. |
NCERT (2026-27): “4.1.1 Consumption The most important determinant of consumption demand is household income. A consumption function describes the relation between consumption and income. The simplest consumption function assumes that consumption changes at a constant rate as income changes. Of course, even if income is zero, some consumption still takes place. Since this level of consumption is independent of income, it is called autonomous consumption. … Autonomous consumption is denoted by C̄ and shows the consumption which is independent of income. If consumption takes place even when income is zero, it is because of autonomous consumption. The induced component of consumption, cY shows the dependence of consumption on income. When income rises by Re 1. induced consumption rises by MPC i.e. c or the marginal propensity to consume. It may be explained as a rate of change of consumption as income changes. …” “Some Definitions Marginal propensity to save (MPS): it is the change in savings per unit change in income. It is denoted by s and is equal to 1 − c. It implies that s + c = 1.” “4.1.2 Investment … where Ī is a positive constant which represents the autonomous (given or exogenous) investment in the economy in a given year.” |