Question

Read the following hypothetical case study carefully and answer the questions on the basis of

the same:

Investment and consumption form a very important component of aggregate demand that do

determine the equilibrium and unemployment level in an economy. The exposed or actual

investment and exante or induced investment determine the investment level and multiplier.

The librium level of GDP is Y=Co+mpc*Y+I. As MPC depends on the investment multiplier thus

investment has a role in determining the equilibrium level of GDP as well.

a) ……….refers to desired or planned investment corresponding to different income levels

in the economy

b) ……….refers to that investment which changes as the level of income changes in the

economy

c) Which of the following is correct in reference of equilibrium level of GDP?

1- Y=C+MPC(Y)-I

2- Y=C-MPC(Y)-I

3- Y=C+MPC(Y)+I

4- Y=C-MPC(Y)=I

d) In case of under employment equilibrium:

1- AS is less than AD

2- There Is excess capacity in the economy

3- Resources are not fully utilised

4- both 2&3​

Answer 1

Answer:

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