Question

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct options given below:
Assertion (A): If the value of Marginal Propensity to Save is 0.5, Marginal Propensity to Consume will be equal to Marginal Propensity to Save.
Reason (R): Sum of Marginal Propensity to Consume and Marginal Propensity to Save always equals to unity.

• 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:

When working with MPC and MPS, always remember that their sum should equal 1, but specific conditions such as the value of MPS must be considered.

Answer 1

The Correct Option is C

Assertion (A) is correct because if the Marginal Propensity to Save (MPS) is 0.5, then the Marginal Propensity to Consume (MPC) will also be 0.5 (since MPC + MPS = 1). However, Reason (R) is incorrect as it suggests that the sum of MPC and MPS is always equal to unity, which is true only under certain conditions and not in all cases.