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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.
By: Parvesh Mehta ProfileResourcesReport error
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