✓ Board-verified
Economics · 2022 · 2 marks
Determination of Income and EmploymentAggregate Demand and its Components2 marksApplyvery short answer
CBSE 2022 · Region 4 · Set 1 · Q2
(a) You are given the consumption function of an imaginary economy, C = 100 + 0·8 Y, where C = Consumption and Y = Income. Calculate: (i) The value…
(a)
You are given the consumption function of an imaginary economy, C = $\displaystyle 100$ + $\displaystyle 0$·$\displaystyle 8$ Y, where C = Consumption and Y = Income.
Calculate :
(i)
The value of Marginal Propensity to Save (MPS)
(ii)
The level of income at Break-Even Point
OR
(b)
S = – $\displaystyle 60$ + $\displaystyle 0$·$\displaystyle 1$ Y is the saving function, where S is Saving and Y is National Income and Investment Expenditure (I) is ₹ $\displaystyle 4{,}000$ crore in an economy.
Calculate the Equilibrium level of Income.
Marking-scheme solution
(a)(i) Given, C = $\displaystyle 100$ + $\displaystyle 0$·8Y
We know that, MPC + MPS = $\displaystyle 1$
MPS = $\displaystyle 1$ – MPC
MPS = $\displaystyle 1$ – $\displaystyle 0$·$\displaystyle 8$ = $\displaystyle 0.2$
(ii)
As we know, at break-even point; Y = C
Y = $\displaystyle 100$ + 0.8Y
0.$\displaystyle 2$ Y = $\displaystyle 100$, Y = ₹ $\displaystyle 500$
(b)Given, S = –$\displaystyle 60$ + $\displaystyle 0$·1Y
I = ₹ $\displaystyle 4{,}000$ crores
We know that, at equilibrium; S = I
–$\displaystyle 60$ + $\displaystyle 0$·1Y = $\displaystyle 4{,}000$
$\displaystyle 0$·$\displaystyle 1$ Y = $\displaystyle 4{,}060$
$\displaystyle Y = \dfrac{4,060}{0\cdot 1}$ ⇒ ₹ $\displaystyle 40{,}600$ crores
All Determination of Income and Employment questions2022 question paperPractice Determination of Income and Employment →
More from Determination of Income and Employment
- At the break-even point level of incomes for the economy is ₹ 10,000 crores and if the people tends to save 20 per cent of their additional income,…2022
- Calculate the Equilibrium level of Income for an imaginary economy, if it is given that: Saving function, S = (–)500 + 0·2 Y where S = Savings, Y =…2022
- State and discuss any one component of Aggregate Demand in a two-sector economy.2022
- 'Investment multiplier and Marginal Propensity to Save are indirectly related to each other.' Explain with the help of numerical example.2022
- Assuming for a hypothetical economy, the following data is given: Income (Y) Consumption Investment (I) Aggregate Demand (AD) 0 20 20 40 100 100 20 –…2026
- “In an economy, ex-ante Aggregate Supply is more than ex-ante Aggregate Demand.” Explain its impact on the level of output, income and employment. OR…2024
- Identify which of the following equations is true. (Choose the correct alternative)2023
- Suppose in an economy, planned spendings are greater than planned outputs. Identify the correct option with respect to effects on the economy: (i)…2025
CBSE Class 12 Economics past-paper question from the 2022 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.