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Match List - I with List - II.

List - I (Curves)List - II (Shape)
(A)Aggregate demand curve(I)Upward sloping line with a positive intercept on y-axis
(B)Aggregate supply curve(II)Parallel to x axis
(C)Autonomous investment curve(III)45 degree line passing through the origin
(D)Consumption function(IV)Parallel to consumption function

Choose the correct answer from the options given below :

Solution

Correct Option: 4

Aggregate demand (AD = C + I) is parallel to consumption function since autonomous investment shifts it upward, so (A)-(IV).

Aggregate supply (AS) is a 45-degree line through the origin (AS = Y), so (B)-(III).

Autonomous investment is fixed regardless of income, so it is parallel to x-axis, (C)-(II).

Consumption function is upward sloping with a positive y-intercept (C = C-bar + bY), so (D)-(I).

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