Which of the following statements is true in regards to saving and income?

1. Savings may be positive when the levels of income are low in the economy.
2. Savings are zero when consumption is equal to income earned.
3. Savings are positive when consumption is less than income
4. Saving is a positive function of income i.e. they share an inverse relationship with each other

2 and 3

The correct answer is Option 2: 2 and 3

Explanation:

• Statement 2 is correct because savings are zero when consumption equals income (i.e., all income is consumed, and nothing is saved).
• Statement 3 is also correct, as savings are positive when consumption is less than income (i.e., some income is left unspent and is saved).

Statement 1 is incorrect because savings are usually low or negative when income is low (as individuals tend to spend most or all of their income).
Statement 4 is incorrect because savings and income have a positive relationship, meaning as income increases, savings also tend to increase—not an inverse relationship.