Question

Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given below: 
Assertion (A): The maximum value of Marginal Propensity to Save (MPS) can be unity. 
Reason (R): At the break-even level of income, savings are zero. 

• A. Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
• B. Both Assertion (A) and Reason (R) are true, but Reason (R) is {not} the correct explanation of Assertion (A).
• C. Assertion (A) is true, but Reason (R) is false.
• D. Assertion (A) is false, but Reason (R) is true.

Hint:

Remember, MPS can reach unity when all income is saved, but at break-even income, savings are zero due to full consumption.

Answer 1

The Correct Option is B

Assertion (A): The maximum value of MPS is 1 when all additional income is saved and none is consumed.
Reason (R): At the break-even level of income, all income is consumed, resulting in zero savings. 
Conclusion: Both statements are correct, but the reason does not adequately explain the assertion.