Which of the following statements on the psychological law of consumption is not correct?
The claim that an increment of income must be equally divided between consumption and saving is incorrect. The psychological law requires \(0<MPC<1\), so consumption rises…
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Which of the following statements on the psychological law of consumption is not correct?
Answer and explanation
Correct answer C
The claim that an increment of income must be equally divided between consumption and saving is incorrect. The psychological law requires , so consumption rises by less than the increase in income; it does not require .
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Kerala SET (LBS Centre)