Question

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given below: 
Assertion (A): The maximum value of Marginal Propensity to Save (MPS) can be unity. 
Reason (R): At the break-even level of income, savings are zero.

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is not} the correct explanation of Assertion (A).
• C. Assertion (A) is true, but Reason (R) is false.
• D. Assertion (A) is false, but Reason (R) is true.

Hint:

MPS can theoretically be unity if all additional income is saved. At break-even income, savings are zero as income equals consumption.

Answer 1

The Correct Option is B

Assertion (A) is true because the maximum value of MPS can be unity in a theoretical case where the entire additional income is saved. However, this rarely happens in real-world economies.
Reason (R) is also true because at the break-even level of income, all income is consumed, and savings are zero. However, Reason (R) does not directly explain Assertion (A), as break-even income is a point where savings transition from negative to positive, while MPS is a measure of how additional income is allocated.