Which of the following statements must be true in the simple macro model ?
A)APC increases as income rises.
B)APS decreases as income rises.
C)MPC is negative below a certain level of income.
D)the sum of MPC and MPS is one.
E)MPS and MPC are both negative.

Question

Quizplus · Accepted Answer

In the simple macro model, the sum of MPC (marginal propensity to consume) and MPS (marginal propensity to save) is always equal to one. This is because all income is either consumed or saved, and there are no other leakages or injections in the model. Therefore, option D is the only statement that must be true.

Which of the Following Statements Must Be True in the Simple