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Economics · 2022 · 2 marks
Determination of Income and EmploymentAggregate Demand and its Components2 marksApplyvery short answer
CBSE 2022 · Region 4 · Set 1 · Q2
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 PointS = – $\displaystyle 60$ + $\displaystyle 0$·$\displaystyle 1$ 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.
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
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
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CBSE Class 12 Economics past-paper question from the 2022board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.