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Economics · 2025 · 4 marks
CBSE 2025 · Region 6 · Set 2 · Q15
Estimate the value of Aggregate Demand (AD) in an imaginary economy: (i) Autonomous Investment ( I_0 ) = ₹ 200 crore (ii) Investment Multiplier (K) =…
Estimate the value of Aggregate Demand (AD) in an imaginary economy :
(i)
Autonomous Investment ($\displaystyle I_0$) = ₹ $\displaystyle 200$ crore
(ii)
Investment Multiplier (K) = $\displaystyle 5$
(iii)
Level of Income (Y) = ₹ $\displaystyle 4,000$ crore
(iv)
Autonomous consumption expenditure ($\displaystyle \bar{c}$) = ₹ $\displaystyle 50$ crore
Marking-scheme solution
Investment Multiplier (K) $\displaystyle = \dfrac{1}{1 - \text{Marginal Propensity to Consume (MPC)}}$$\displaystyle 5 = \dfrac{1}{1 - \text{MPC}}$MPC $\displaystyle = 0.8$As we know, Aggregate Demand (AD) $\displaystyle = C + I$$\displaystyle = \bar{c} + (\text{MPC})\,Y + I$$\displaystyle = 50 + (0.8) \times 4000 + 200$$\displaystyle = $ ₹ $\displaystyle 3,450$ crore
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