Discussion
Which of the following statements is incorrect?
Answer: D
The incorrect statement is that consumption is zero when income is zero. Even with no income, households must spend something to live, by borrowing or drawing on past savings, so there is a positive autonomous consumption. The other statements are correct: MPC + MPS = 1 because any extra income is either consumed or saved, MPC is the ratio of the change in consumption to the change in income, and disposable income is the most important determinant of household consumption. The answer is option D.
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