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CUET Economics 2025 PYQs31 May Shift 1. Free, no login required.

Macro

past year questions, CUET Economics 2025 31 May Shift 1

Income & Employment

past year questions, Macro, CUET Economics 2025 31 May Shift 1

Easy

How much consumption will increase when income increases by Rs. 5000 at given marginal propensity to consume of 0.60.

  1. Increase in consumption= Rs. 5000
  2. Increase in consumption= Rs. 4000
  3. Increase in consumption= Rs. 3000
  4. Increase in consumption= Rs. 2000

Solution

✅ Correct Option: 3

Option 1 -> This assumes MPC = 1 (entire income increase consumed), but given MPC = 0.60.

Option 2 -> This implies MPC = 0.80 (4000/5000), which doesn't match the given MPC.

Option 3 -> Correctly applies the formula: Increase in Consumption = MPC × Change in Income = 0.60 × 5000 = Rs. 3000.

Option 4 -> This implies MPC = 0.40 (2000/5000), which is incorrect.

Hence, Option 3: Increase in consumption= Rs. 3000 -> The Marginal Propensity to Consume (MPC) represents the proportion of additional income that is spent on consumption. Using the formula: Change in Consumption = MPC × Change in Income = 0.60 × 5000 = Rs. 3000. The remaining Rs. 2000 (40%) would be saved, as MPS (Marginal Propensity to Save) = 1 - MPC = 0.40. -> correct

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Choose the correct answer from the options given below:

2025: 31 May Shift 1

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

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