Macro

Income & Employment

Medium

Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs 80 crores, and MPC is 0.75.

80 crore

160 crore

320 crore

640 crore

✅ Correct Option: 3

Option 1 -> Does not account for the multiplier effect on autonomous expenditure.

Option 2 -> Incorrect multiplier calculation applied to autonomous expenditure.

Option 3 -> Correctly applies multiplier (k = 1/(1-MPC) = 4) to autonomous expenditure (80 × 4 = 320).

Option 4 -> Incorrectly doubles the correct aggregate demand value.

Hence, Option 3: 320 crore -> The ex-ante aggregate demand is calculated using the formula: Y = k × A, where k is the multiplier = 1/(1-MPC) = 1/(1-0.75) = 1/0.25 = 4. Therefore, Y = 4 × 80 = 320 crores. The multiplier effect amplifies the initial autonomous expenditure by a factor of 4, resulting in an aggregate demand of Rs 320 crores. -> correct

2024: 16 May

If the value of Investment Multiplier is 5 and the increased income is ₹ 800 crore in an economy, then find the value of change in the investment in the economy.

2022: 16 July Shift 2

In an economy if equilibrium level of national is Rs. 2000 crores, Autonomous consumption = Rs. 400 crores and Investment expenditure = Rs. 200 crores, then MPC will be:

2023: 28 May Shift 2

At a particular price level, when aggregate demand for final goods equals aggregate supply of final goods, the product market reaches to its __________.

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.

2025: 27 May Shift 2

________ is the ratio of the total increment in equilibrium value of final goods output to the initial increment in autonomous expenditure of the economy.

2023: 29 May Shift 2

C=40+0.8Y and I =10, then what will be the equilibrium level of income?

Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs 80 crores, and MPC is 0.75.

Solution

Related questions:

Keyboard Shortcuts

CUET Economics Past Year Questions (Topic-Wise)