Question

Which of the following is true concerning the relationship between the marginal propensity to consume and the consumption function ?

Answer 1

Minor Propensity to Consume  

The minor penchant to devour, now and then alluded to just as MPC, is utilized to figure out what part of an element's additional cash is expended, or spent. MPC demonstrates how devouring changes as salary changes. It very well may be communicated as the proportion of a substance's adjustment in spending over its adjustment in pay. For instance, envision a business started procuring $200 additional every month. The business than starts to spend an additional $100 every month. The MPC is 50 percent; of every additional dollar the organization procures, around 50 pennies is spent.  

Minor Propensity to Save  

The minor affinity to spare, or MPS, is utilized to figure out what part of an element's additional salary is spared. MPS shows how sparing changes as salary changes. MPS is the proportion of an element's adjustment in investment funds to its adjustment in salary. For instance, if a business acquires $200 of additional pay multi month and starts to spare an extra $100 every month, the MPS is 50 percent.

Answer 2

According to the theory prescribed by Keynes, the value of the marginal propensity to consume is less than one, which is expressed by the following formula:

Marginal Propensity to Consume(MPC) <1.

This is the relationship that exists between MPC and consumption function.

Marginal Propensity is spent by the consumers by consuming goods which is a fraction of aggregate raise in terms of payment.