Assertion (A): If the MPC of an economy is 0.8, its investment multiplier is 4.
Reason (R): The MPS is the change in savings per unit change in income, and it is equal to 1 – c.
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (A) is false but (R) is true.
Assertion (A): If the MPC of an economy is 0.8, its investment multiplier is 4. — False. The multiplier is 1 / (1 − 0.8) = 5, not 4.
Reason (R): The MPS is the change in savings per unit change in income, and it is equal to 1 – c. — True. This is the definition of the MPS, s = 1 − c.
NCERT (2026-27): “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.”
|
