Question

The value of _____ can never be negative, while can have a value equal to one.

• A. APS, APC
• B. MPG, APS
• C. APC, APS
• D. MPS, APC

Answer 1

The correct option is D MPS, APC

APC refers to Average Propensity to Consume which defines the amount of consumption in every 1 rupee of income for all level of income which can never be negative because consumption is never negative owing to the very existence of life and basic needs to satisfy it while it can be more than one as long as consumption is more national income, i.e. before the break-even point, APC > 1.

Marginal Propensity to save refers to the percentage change in savings for every one rupee of change in the income. It is the ratio between the change in income and its corresponding change in savings. It can never be negative as it is a change in the value when the value of income changes while it can be equal to one if the overall change in the value of income is used in savings.