Q25.The consumption expenditure and investment demand are Rs 600 crores and Rs 300 crores respectively ,when income is Rs 1000 crores. Calculate (i)aggregate demand (ii)Aggregate supply (iii)Saving.
Answers
Answer:
Calculate aggregate demand (AD), aggregate supply (AS) for all levels and the equilibrium level of income from the given schedule, it the Investment is fixed at 20 crores:
Income 0 10 20 30 40 50 60 70 80 90 100
Consumption 20 25 30 35 40 45 50 55 60 65 70
(AD: 40, 45, 50, 55, 60, 65, 70, 75, 80, 85 90; AS: 0, 10, 20 30. 40, 50, 60, 70, 80, 90 100; Equilibrium level of Income: Rs. 80 Crores)
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ANSWER
Aggregate supply refers to the desired level of output in the economy during an accounting year. It is through this output only that the producer sector generates income. Therefore, aggregate supply= consumption + savings.
Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.
Income
0
10
20
30
40
50
60
70
80
90
100
Consumption
20
25
30
35
40
45
50
55
60
65
70
Investment
20
20
20
20
20
20
20
20
20
20
20
Aggregate Supply
0
10
20
30
40
50
60
70
80
90
100
Aggregate Demand
40
45
50
55
60
65
70
75
80
85
90
At equilibrium level of output, AD=AS which is at Rs. 80 crores of income.