Read the two statements and choose the correct option.
I. In Keynes's theory, the MPC lies between 0 and 1.
II. When income rises, consumption rises by the full amount of the rise.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

People consume part of an extra rupee and save the rest, so 0 < MPC < 1. I is true.
Consumption rises by less than income. II is false.

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

Ten questions from Aggregate Demand, Consumption & Saving, at your own pace.

Read the two statements and choose the correct option.I. In Keynes's theory, the MPC lies between 0 and 1.II. When income rises, consumption rises by the full amount of the rise.