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Production Possibility Frontier

Give the mean...

Question

Give the meaning of average propensity to save. What is its relation with average propensity to consume?

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Solution

APS refers to Average Propensity to save which defines the amount of savings in every 1 rupee of income for all level of income.
Therefore, APC+ APS
=C/Y+S/Y
=C+S/Y
= Y/Y
= 1
Hence, APC+APS= 1.

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