Question

If consumption is Rs 300 Cr. and income is Rs 300 crore, what is APC and what does this imply?

• A. 1 and it implies that on an average 100 per cent of the total income has been spent on consumption.
• B. 0.5 and it implies that on an average 50 per cent of the total income will be spent on consumption.
• C. 1 and it implies that on an average 100 per cent of the total income has been spent on saving.
• D. 0.5 and it implies that on an average 50 per cent of the total income will be spent on saving.

Answer 1

The correct option is A 1 and it implies that on an average 100 per cent of the total income has been spent on consumption.

APC = $\frac{C}{Y}$

where, C = consumption

and Y = income

Hence, APC = $\frac{300}{300}$ $=1$
This implies that on an average 100 per cent of the total income has been spent on consumption.