Match List-I with List-II. List

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Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

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:

Options:

(A)-(I), (B)-(II), (C)-(III), (D)-(IV)

(A)-(I), (B)-(III), (C)-(II), (D)-(IV)

(A)-(I), (B)-(II), (C)-(IV), (D)-(III)

(A)-(III), (B)-(IV), (C)-(I), (D)-(II)

Correct Answer:

(A)-(III), (B)-(IV), (C)-(I), (D)-(II)

Explanation:

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)