Macro

Income & Employment

Medium

In an economy , the aggregate demand function is given by AD= 80 + 0.75 Y. What will be the value of investment multiplier?

0.25

✅ Correct Option: 4

Option 4: 4 -> The investment multiplier is calculated using the formula: k = 1/(1-MPC). From the given aggregate demand function AD = 80 + 0.75Y, we can identify that the marginal propensity to consume (MPC) = 0.75. Therefore, the multiplier k = 1/(1-0.75) = 1/0.25 = 4. This means that a one-unit increase in investment will lead to a 4-unit increase in national income through the multiplier effect. -> correct

2022: 16 July Shift 2

In an economy MPS=0.20 and investment is increased by Rs. 400 crores, than total increase in income is _____ Crores.

2022: 16 July Shift 2

Actual aggregate demand's gap from that needed to achieve full employment equilibrium is referred to as:

2025: 15 May Shift 1

Identify the correct expression to calculate equilibrium level of income of an economy.

2023: 30 May Shift 1

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2025: 13 May Shift 1

Level of employment is determined by which of the following?

2025: 30 May Shift 1

In an Economy , total savings are rs. 2000 crores and the ratio of average propensity to save and average propensity to consume is 2: 7. Calculate the level of income in the economy?

In an economy , the aggregate demand function is given by AD= 80 + 0.75 Y. What will be the value of investment multiplier?

Solution

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