Assertion (A): Saving can be negative at low levels of income.
Reason (R): The MPS is negative at low levels of income.

Both A and R are true, and R is the correct explanation of A.Correct answerYour answerBoth A and R are true, but R is not the correct explanation of A.Correct answerYour answerA is true, but R is false.Correct answerYour answerA is false, but R is true.Correct answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

A is true: below break-even, consumption exceeds income.
R is false: the MPS is a positive fraction at every income; it is the level of saving that is negative.

Concept: Negative saving, positive MPS
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsThe saving function and break-even

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Assertion (A): Saving can be negative at low levels of income.Reason (R): The MPS is negative at low levels of income.

Explanation

Assertion (A): Saving can be negative at low levels of income.
Reason (R): The MPS is negative at low levels of income.