Match List-I with List-II.
|
List-I |
List-II |
|
(A) Average propensity to save |
(I) Inversely related to investment multiplier |
|
(B) Average propensity to consume |
(II) Ratio of change in consumption to change in income |
|
(C) Marginal propensity to save |
(III) Always lesser than one |
|
(D) Marginal propensity to consume |
(IV) Can't be zero |
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A)-(III), (B)-(IV), (C)-(I), (D)-(II)
Here's the correct matching:
-
(A) Average propensity to save - (III) Always lesser than one:
- APS (Average Propensity to Save) is the ratio of total savings to total income. Since not all income is saved, APS is always less than 1.
-
(B) Average propensity to consume - (IV) Can't be zero:
- APC (Average Propensity to Consume) is the ratio of total consumption to total income. People always consume something, even if it's a minimal amount, so APC cannot be zero.
-
(C) Marginal propensity to save - (II) Ratio of change in consumption to change in income:
- MPS (Marginal Propensity to Save) measures the change in savings due to a change in income.
-
(D) Marginal propensity to consume - (I) Inversely related to investment multiplier:
- MPC (Marginal Propensity to Consume) is the proportion of additional income that is consumed. The investment multiplier is inversely related to MPS (and therefore directly related to MPC). A higher MPC leads to a larger multiplier effect.
Therefore, the correct answer is (A)-(III), (B)-(IV), (C)-(II), (D)-(I)