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:

MPS theoretically ranges from 0 to 1, but break-even income relates to the point where savings are zero, not necessarily the highest MPS value.

Answer 1

The Correct Option is B

Assertion (A): This is true because theoretically, MPS could reach unity if all additional income is saved, but practically, this is rare. 
Reason (R): This is also true since, at the break-even level of income, consumption equals income, leaving savings at zero. 
Conclusion: While both statements are true, Reason (R) does not correctly explain Assertion (A) since break-even income concerns savings at zero, not the maximum possible value of MPS.