Which of the following is true?
I. 1 − MPS = MPC where MPS = marginal propensity to save and MPC = marginal propensity to consume.
II. personal saving + consumption = gross income
III. ∆disposable income = ∆saving + ∆consumption where ∆ = change in
A) I, II, and III
B) I and II only
C) I and III only
D) II and III only

Question

Quizplus · Accepted Answer

I. is true, as it is one of the basic equations in Keynesian economics. 
II. is not true, as gross income also includes taxes and transfers, which are not accounted for in this equation. 
III. is true, as it is another basic equation in Keynesian economics, showing that any change in disposable income will be split between changes in saving and consumption. Therefore, the correct option is C, as I and III are true, but II is not.

Which of the Following Is True