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Economics · 2023 · 4 marks
Determination of Income and EmploymentDetermination of Income in Two-sector Model4 marksApplyshort answer
CBSE 2023 · Region 3 · Set 2 · Q15
Suppose the following information is given about a hypothetical economy: C = 200 + 0.75 Y (where, C = Consumption and Y = Income) I₀ = 300 (I₀ =…
Suppose the following information is given about a hypothetical economy :
C = $\displaystyle 200$ + $\displaystyle 0.75$ Y (where, C = Consumption and Y = Income)
I₀ = $\displaystyle 300$ (I₀ = Autonomous Investment)
Calculate the following on the basis of the given information :
(a)
Equilibrium Level of Income
(b)
Aggregate Demand at Equilibrium Level of Income
(c)
Marginal Propensity to Save
Marking-scheme solution
Given, C = $\displaystyle 200$ + 0.75Y; I₀ = $\displaystyle 300$
(a)
We know that;
At equilibrium level of income
Y = C + I
Y = ($\displaystyle 200$ + 0.75Y) + $\displaystyle 300$
0.25Y = $\displaystyle 500$
Y = $\displaystyle 2,000$
(b)
At the Equilibrium level of income
AD = Y
∴ AD = $\displaystyle 2,000$
(c)
MPS = $\displaystyle 1$ – MPC
MPS = $\displaystyle 1$ – $\displaystyle 0.75$ = $\displaystyle 0.25$
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CBSE Class 12 Economics past-paper question from the 2023 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.