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The level of equilibrium income is also determined by
APC + APS = 1 because income is either used for consumption or for saving.
Mathematically, in a closed economy, MPS + MPC = 1
Since MPS is measured as ratio of change in savings to change in income, its value lies between 0 and 1. Also, marginal propensity to save is opposite of marginal propensity to consume. Mathematically, in a closed economy, MPS + MPC = 1, since an increase in one unit of income will be either consumed or saved.
Between APS and MPS, the value of APS can be negative when consumption expenditure becomes higher than income.
If income is Rs 1000 and consumption expenditure is Rs 200, APS will be
The ratio of total saving to total income is called APS.
APS = 800/1000
= 0.8
The important factor influencing the propensity to consume in an economy is
The important factor influencing the propensity to save in an economy is
The savings function derived from the consumption function c=a+by is
The correct option is B.
The Consumption function is a+bY and not a+bY
We know, Y=C+S
S= Y  C
S=Y(a+bY)
S=YabY
S= a+YbY
S= a+(1b)Y
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