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------------------------------------------------ Which of the following is correct?

A. APC + APS = 1.
B. APC + MPS = 1.
C. APS + MPC = 1.
D. APS + MPS = 1.

As disposable income increases, consumption:

A. and saving both increase.
B. and saving both decrease.
C. decreases and saving increases.
D. increases and saving decreases.

The correct equation is APS + MPS = 1, where APS represents average propensity to save and MPS represents marginal propensity to save. This equation indicates that the sum of average propensity to save and marginal propensity to save equals 1.

When disposable income increases, individuals tend to consume more (as indicated by the higher average propensity to consume, APC) and save less (as indicated by the lower average propensity to save, APS). This means that as income increases, a larger portion is allocated towards consumption and a smaller portion is allocated towards saving.

The options A, B, and C are incorrect because they do not accurately represent the relationship between consumption and saving as disposable income increases. The correct relationship is that consumption increases and saving decreases.

As disposable income increases, the correct relationship between consumption and saving is that consumption increases and saving decreases. This is represented by option D, where APS + MPS = 1. It is important to understand the relationship between income, consumption, and saving in order to analyze and predict the behavior of individuals and the overall economy.

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