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Question : If MPC is four times MPS and consumption at zero level of income is 80 crore. Derive the saving function.

Option 1: S=80+0.8Y

Option 2: S=80-0.8Y

Option 3: S= -80+0.2Y

Option 4: S= -80+0.8Y


Team Careers360 15th Jan, 2024
Answer (1)
Team Careers360 16th Jan, 2024

Correct Answer: S= -80+0.2Y


Solution : MPC:MPS= 4:1, or

MPC:MPS= 0.8:0.2, since MPC+MPS= 1

S= -80+0.2Y

Hence, Option C is correct.

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