Question : Which of the following statement are true?
- When consumption function is C=40+0.8Y, savings will be equal to -40 at zero level of income.
- As per above consumption function, MPS= 0.2
Option 1: Both are true.
Option 2: Both are false.
Option 3: Statement 1 is true, statement 2 is false.
Option 4: Statement 1 is false, statement 2 is true.
Answer (1)
25th Jan, 2024
Correct Answer:
Both are true.
Solution :
When Y=0, Autonomous consumption is 40. Savings at zero level of income will be -40.
C=40+0.8Y
MPC= 0.8
MPS= 0.2
Hence, Option A is correct.
MPS= 0.2
Hence, Option A is correct.
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