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Given that in an economy, consumption function is

C = 80 + 0.80Y and autonomous investment (I) = 120,

Match List-I with List-II

List-IList-II
(A) Equilibrium level of income(I) 400
(B) Break-even point(II) 120
(C) Investment multiplier(III) 5
(D) Value of savings at equilibrium(IV) 1000

Choose the correct answer from the options given below:

Solution

✅ Correct Option: 3

(A) - (IV), (B) - (I), (C) - (III), (D) - (II) -> Given C = 80 + 0.80Y and I = 120:

(A) Equilibrium level of income: At equilibrium, Y = C + I. So Y = 80 + 0.80Y + 120, which gives Y = 200 + 0.80Y. Solving: 0.20Y = 200, therefore Y = 1000 → matches with (IV).

(B) Break-even point: This occurs where consumption equals income (C = Y), meaning savings = 0. So Y = 80 + 0.80Y, which gives 0.20Y = 80, therefore Y = 400 → matches with (I).

(C) Investment multiplier: Multiplier = 1/(1-MPC) = 1/(1-0.80) = 1/0.20 = 5 → matches with (III).

(D) Value of savings at equilibrium: Savings S = Y - C = Y - (80 + 0.80Y) = 0.20Y - 80. At equilibrium Y = 1000, S = 0.20(1000) - 80 = 200 - 80 = 120 → matches with (II).


Hence, Option 3: (A) - (IV), (B) - (I), (C) - (III), (D) - (II) -> This correctly matches all four components: equilibrium income is 1000 (where aggregate demand equals aggregate supply), break-even point is 400 (where households neither save nor dissave), investment multiplier is 5 (showing a ₹1 change in investment leads to ₹5 change in income), and savings at equilibrium is 120 (which equals autonomous investment, satisfying the equilibrium condition S = I) -> correct

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