Arrange the following steps in ascending order in respect to determination of equilibrium level of income in an economy as a result of change in autonomous expenditure:
A. The output and aggregate demand will increase.
B. In the economy autonomous investment increased by Rs. 10 Cr.
C. The aggregate demand curve shifts in parallel upwards.
D. The investment multiplier works in forward direction.
Choose the correct answer from the options given below:
Arrange the following steps in ascending order in respect to determination of equilibrium level of income in an economy as a result of change in autonomous expenditure:
A. The output and aggregate demand will increase.
B. In the economy autonomous investment increased by Rs. 10 Cr.
C. The aggregate demand curve shifts in parallel upwards.
D. The investment multiplier works in forward direction.
Choose the correct answer from the options given below:
Solution
NTA's official sequence is B, D, C, A: autonomous investment first increases by Rs. 10 crore (B); the investment multiplier starts working in the forward direction (D); the aggregate demand curve shifts upward (C); and output and aggregate demand finally increase (A).
From the NCERT graph, it can also seem natural to place the upward shift of the aggregate demand curve immediately after the rise in autonomous investment. However, we are strictly following NTA's official answer key. Therefore, Option 1 is correct.
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