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Determination Of Income And Employment

Question

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Ex-ante aggregate demand i.e.,
AD = C + I
$equals space straight C with bar on top space plus space bY space plus space straight I with bar on top equals space straight C with bar on top space plus space straight I with bar on top space plus space MPC space cross times space straight Y space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space space left parenthesis straight b space represents space MPC right parenthesis equals space top enclose straight A space plus space 0.8 space cross times space straight Y space space space space space space space space space space space space space space space space space space space space space left parenthesis MPC space equals space 1 minus MPS space equals space 1 minus 0.2 space equals space 0.8 right parenthesis equals space 50 plus 0.8 space cross times space 4000 space space space space space space space space space space space space space space space left parenthesis by space substituting space value space of space straight A with bar on top space and space straight Y right parenthesis$
Aggregate demand $equals space 50 space plus 3200 space equals space 3250$
Since AD (i.e., र 3250) is not equal to AS (i.e., र 4000), therefore, economy is not in equilibrium.

Solution

Some More Questions From Determination of Income and Employment Chapter

State relationship between income and consumption.

What is Breakeven point?

What are the types of Propensity to consume?

How does MPC affect level of income?

Distinguish between APC and MPC, The value of which of APC and MPC can be greater than one and when?

State relationship between income and saving.

What is saving function (or Propensity to save)?

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