CA Foundation · Business Economics · Determination of National Income
In a two-sector Keynesian model, which of the following best describes the marginal propensity to save (MPS)?
MPS is the change in saving divided by the change in income. It shows how much of each additional rupee of income is saved. It differs from the average propensity to save, which uses total saving, and MPC plus MPS always equals one.
- ATotal saving divided by total income
- BChange in saving divided by change in incomeCorrect
- CChange in consumption divided by change in income
- DChange in investment divided by change in saving
Explanation
MPS = ΔS/ΔY, the extra saving from an extra rupee of income. Total saving over income is the average propensity to save. Option C is MPC, and MPC + MPS = 1.
Did you get it right without looking?
One question tells you little. A timed set on Determination of National Income shows your real accuracy, how long you take and where you lose marks.
More Determination of National Income questions
- Which of the following is correctly identified as a transfer payment and should be excluded from the measurement of National Income?
- In a two-sector Keynesian model, the marginal propensity to consume is 0.8 and the economy is currently in equilibrium at an income of ₹2,00…
- The consumption function of an economy is C = 100 + 0.8Y (₹ crore). At an income level of ₹1,000 crore, what are the saving and the average …
- In a Keynesian consumption function C = a + bY, where a > 0 and 0 < b < 1, which statement about the average propensity to consume (APC) as …
- In Keynes's theory, the investment multiplier would be highest in an economy where:
- An economy has the following (₹ crore): GDP at market prices 20,000; net factor income from abroad (–)500; consumption of fixed capital 1,80…