Calculate the equilibrium income when MPC = .25 and transfers increases by 50. Option 1: 4 Option 2: 66.67 Option 3: 16.67 Option 4: 5.33

Answer: 16.67. Solution: The transfer multiplier is c/(1-c) where c is MPC. With c = 0.25, the multiplier is 0.25/0.75 = 1/3. So the change in equilibrium income is Y = 1/3 x 50 = 16.67. Note: The NTA prompt says calculate the equilibrium income; we have computed the change in equilibrium income due to the rise in transfers, which appears to be the intended task.

Macro

Income & Employment

Medium

Calculate the equilibrium income when MPC = .25 and transfers increases by 50.

66.67

16.67

5.33

✅ Correct Option: 3

The transfer multiplier is $\frac{c}{1-c}$ where $c$ is MPC. With $c = 0.25$ , the multiplier is $\frac{0.25}{0.75} = \frac{1}{3}$ . So the change in equilibrium income is $\Delta Y = \frac{1}{3} \times 50 = 16.67$ .

Note: The NTA prompt says calculate the equilibrium income; we have computed the change in equilibrium income due to the rise in transfers, which appears to be the intended task.

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If C= X+0.6Y & Investment is Rs 1,500 Equilibrium level of income in economy would be 4050, find out the autonomous consumption.

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In macroeconomics, when a price is constant, equilibrium is achieved at a point where?

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If the Marginal Propensity to Save (MPS)=0.2.The Value of the multiplier will be-

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Match List-I with List-II

List-I	List-II
(A) An increase in proportional taxes	(I) Decreases consumption by MPC times the change in taxes.
(B) An increase in lump-sum taxes	(II) Automatic Stabilizer.
(C) Proportional income tax	(III) Aggregate demand curve shift inwards.
(D) Lump sum taxes	(IV) Do not depend upon income.

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)
(A) - (I), (B) - (III), (C) - (II), (D) - (IV)
(A) - (III), (B) - (I), (C) - (II), (D) - (IV)
(A) - (III), (B) - (I), (C) - (IV), (D) - (II)

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If output equilibrium is less than the full employment level, then this condition is known as:

2022: 16 July Shift 2

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

Calculate the equilibrium income when MPC = .25 and transfers increases by 50.

Solution

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