Macro

Income & Employment

Medium

The equilibrium level of income depends on aggregate demand. Thus, if aggregate demand changes, the equilibrium level of income changes. This can happen in anyone or combination of the following situations:

(A) Change in autonomous consumption.

(B) Change in marginal propensity to consume.

(C) Income.

(D) Change in autonomous investment.

Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(B), (C) and (D) only

✅ Correct Option: 1

Option 1 -> Includes changes in autonomous consumption, MPC, and autonomous investment - all factors that shift aggregate demand and change equilibrium income.

Option 2 -> Incorrectly includes income as a causal factor; income is the dependent variable being determined, not an independent factor causing change.

Option 3 -> Incorrectly includes income (C) as a factor that changes equilibrium; income is the outcome, not the cause.

Option 4 -> Excludes autonomous consumption and incorrectly includes income as a causal factor.

Hence, Option 1: (A), (B) and (D) only -> In the Keynesian model, equilibrium income is determined where aggregate demand equals aggregate supply. Changes in autonomous consumption (A) and autonomous investment (D) shift the aggregate demand curve vertically, creating a new equilibrium. Changes in marginal propensity to consume (B) alter the slope of the consumption function and the multiplier value, also changing equilibrium income. However, income (C) itself is the dependent variable being determined by these factors, not an independent cause of equilibrium change. Income adjusts TO reach equilibrium; it doesn't cause the equilibrium to change. -> correct

2026: 19 May Shift 2

Match the LIST-I with LIST-II

LIST-I (Income related Aggregates)	LIST-II (Computation)
A. Saving	I. Consumption plus investment
B. Aggregate Demand	II. Income minus consumption
C. Marginal Propensity to consume	III. 1 / 1 - MPC
D. Investment multiplier	IV. Change in consumption / Change in Income

Choose the correct answer from the options given below:

2025: 29 May Shift 2

When aggregate output is determined solely by the level of aggregate demand, the relation between aggregate supply and price is?

2026: 31 May Shift 1

Calculate the different values of multiplier from the given consumption functions and arrange them in increasing order.

A. C = 10 + 0.8Y

B. C = 12 + 0.6Y

C. C = 14 + 0.5Y

D. C = 16 + 0.2Y

Choose the correct answer from the options given below:

2026: 13 May Shift 2

Calculate the equilibrium value of the output and aggregate demand when autonomous investment and consumption $(\overline{C} + \overline{I})$ is Rs. 80 crores and MPC is 0.2.

2025: 29 May Shift 1

What are the equilibrium conditions in the Keynesian model of income determination?

(A) Aggregate demand = Aggregate supply.

(B) Savings= Investment.

(D) Planned Expenditure= Planned Output.

Choose the correct answer from the options given below:

2025: 31 May Shift 1

Arrange the following statements in sequential order.

(A) Aggregate demand will increase.

(B) Induce the public to borrow more.

(D) Ex-ante aggregate demand is less than Ex-ante aggregate supply

Choose the correct answer from the options given below:

(A), (B), (C), (D)
(A), (C), (B), (D)
(D), (C), (B), (A)
(A), (B), (D), (C)

Solution

Related questions:

Keyboard Shortcuts

CUET Economics Past Year Questions (Topic-Wise)