Question

Match List-I with List-II:

List-I	List-II
(A) Average propensity to save	(I) Inversely related to the investment multiplier
(B) Average propensity to consume	(II) Ratio of change in consumption to change in income
(C) Marginal propensity to save	(III) Always less than one
(D) Marginal propensity to consume	(IV) Can’t be zero

Choose the correct answer from the options given below:

• A. (A)-(I), (B)-(II), (C)-(III), (D)-(IV)
• B. (A)-(III), (B)-(IV), (C)-(I), (D)-(II)
• C. (A)-(I), (B)-(III), (C)-(IV), (D)-(II)
• D. (A)-(III), (B)-(II), (C)-(IV), (D)-(I)

Answer 1

The Correct Option is A

The objective is to correlate economic terms from List-I with their accurate descriptions in List-II. Each term will be examined to identify its corresponding description.

• (A) Average propensity to save (APS): This measures the proportion of aggregate income that is saved. It exhibits an inverse relationship with the investment multiplier (I) because saving curtails consumption, thereby diminishing the multiplier's effect.
• (B) Average propensity to consume (APC): This represents the fraction of total income allocated to consumption, typically below one. However, the List-II description aligns more precisely with the marginal propensity to consume, defined as the ratio of consumption change to income change. This corresponds to option (II).
• (C) Marginal propensity to save (MPS): This denotes the ratio of change in savings to the change in income. It is always complementary to MPC, summing to one with it, though each remains individually less than one. MPS is consistently below one, thus matching with (III).
• (D) Marginal propensity to consume (MPC): This signifies the alteration in consumption stemming from a change in income. It cannot be zero, always assuming a value less than one, consistent with description (IV) as a portion of additional income is invariably consumed.

Result: The definitive pairings are: (A)-(I), (B)-(II), (C)-(III), (D)-(IV).