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Economics · 2025 · 4 marks
CBSE 2025 · Region 6 · Set 1 · Q13
(a)Estimate the value of Aggregate Demand (AD) in an imaginary economy :(i)Autonomous Investment (I$\displaystyle _0$) = ₹ $\displaystyle 100$ crore(ii)Marginal Propensity to Save (MPS) = $\displaystyle 0$·$\displaystyle 2$(iii)Level of Income (Y) = ₹ $\displaystyle 4,000$ crore(iv)Autonomous Consumption Expenditure ($\displaystyle \bar{c}$) = ₹ $\displaystyle 50$ crore(b)State the meaning of propensity to consume.
(a)
Estimate the value of Aggregate Demand (AD) in an imaginary economy :
(i)
Autonomous Investment (I$\displaystyle _0$) = ₹ $\displaystyle 100$ crore
(ii)
Marginal Propensity to Save (MPS) = $\displaystyle 0$·$\displaystyle 2$
(iii)
Level of Income (Y) = ₹ $\displaystyle 4,000$ crore
(iv)
Autonomous Consumption Expenditure ($\displaystyle \bar{c}$) = ₹ $\displaystyle 50$ crore
(b)
State the meaning of propensity to consume.
Marking-scheme solution
(a)
Marginal Propensity to Consume (MPC) = $\displaystyle 1$ – MPS
= $\displaystyle 1$ – $\displaystyle 0.2$ = $\displaystyle 0.8$
As we know, Aggregate Demand (AD) = C + I
= $\displaystyle \bar{c}$ + (MPC) Y + I
= $\displaystyle 50$ + ($\displaystyle 0.8$) x $\displaystyle 4,000$ + $\displaystyle 100$
= ₹ $\displaystyle 3,350$ crore
(b)
Propensity to Consume refers to tendency of individuals to spend a portion of their income on consumption.
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CBSE Class 12 Economics past-paper question from the 2025board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.