When MPC is equal to 0 ........

Economics (CUET) Determination of Income and Employment

When MPC is equal to 0

increase in savings = increase in income

entire increase in income is saved

increase in consumption = increase in income

both A&B correct

- Option 1: Increase in savings = increase in income

- This occurs when the entire change in income is saved.

- Option 2: Entire increase in income is saved

- When MPC (Marginal Propensity to Consume) is 0, it implies that all additional income is saved, not spent.

- Option 3: Increase in consumption = increase in income

- This implies that all additional income is spent, which occurs when MPC is 1, not 0.

- Option 4: Both A & B correct

- Both Option 1 and Option 2 are consistent with MPC = 0, as all income increases are saved.

Option 4 is the correct choice.

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