Class 12 Macro Economics: Income Determination and Multiplier
Chapter 8: Income Determination and Multiplier — learn equilibrium output determination using the AD-AS approach and Saving-Investment approach, the concept of investment multiplier, its working with diagrams, and the reverse operation of the multiplier. CBSE Class 12 Macroeconomics notes covering 9 topics: Equilibrium Condition and Approaches, AD-AS Approach, Saving-Investment Approach, Types of Equilibrium, Equilibrium Output at Fixed Price, Concept of Investment Multiplier, Working and Diagrammatic Multiplier, Reverse Operation of Multiplier, and Summary of Important Formulas.
Topics(9)
Equilibrium Condition and Approaches
Equilibrium Condition and Approaches — understand the equilibrium condition where AD equals AS and the two approaches to determine equilibrium output. CBSE Class 12 Macroeconomics notes.
AD-AS Approach
AD-AS Approach — learn how equilibrium output is determined using the Aggregate Demand and Aggregate Supply framework with diagrams. CBSE Class 12 Macroeconomics notes.
Saving-Investment Approach
Saving-Investment Approach — understand how equilibrium is reached through the equality of saving and investment with real-life examples. CBSE Class 12 Macroeconomics notes.
Types of Equilibrium
Types of Equilibrium — learn about under-employment equilibrium, full-employment equilibrium, and inflationary gap. CBSE Class 12 Macroeconomics notes.
Equilibrium Output at Fixed Price
Equilibrium Output at Fixed Price — understand how equilibrium output is determined when prices are assumed to be fixed in the short run. CBSE Class 12 Macroeconomics notes.
Concept of Investment Multiplier
Concept of Investment Multiplier — learn the meaning, formula, and significance of the investment multiplier in Keynesian economics. CBSE Class 12 Macroeconomics notes.
Working and Diagrammatic Multiplier
Working and Diagrammatic Multiplier — understand how the multiplier works step by step with diagrammatic representation. CBSE Class 12 Macroeconomics notes.
Reverse Operation of Multiplier
Reverse Operation of Multiplier — learn how the multiplier works in reverse when investment decreases, causing a chain of income reduction. CBSE Class 12 Macroeconomics notes.
Summary of Important Formulas
Summary of Important Formulas — a quick reference of all key formulas for equilibrium output, multiplier, and related concepts. CBSE Class 12 Macroeconomics notes.
Questions by Textbook
Study Simplify Special
Frequently Asked Questions
<p>If an upward sloping straight line consumption function makes an intercept at the Y-axis at a positive coordinate, it implies that Marginal Propensity to Consume (MPC) ___________ and Average Propensity to Consume (APC) ___________ as the income increases. (Choose the correct option to fill in the blanks)</p>
(D) falls, falls
<p>Suppose, the consumption function is given as : C = 205 + 0.9 Y (where C = Total Consumption and Y = National Income) The value of Investment Multiplier (K) would be ____________. (Choose the correct option to fill in the blank)</p>
(D) 9.0
<p>Read the following statements : Assertion (A) and Reason (R). Choose the correct alternative from those given below. Assertion (A) : Ex-ante savings and Ex-ante investments are never equal to each other. Reason (R) : At equilibrium level of income, aggregate demand may not be equal to the aggregate supply. Alternatives :</p>
(D) Assertion (A) is false, but Reason (R) is true.
<p>An increase in National Income occurs by Rs. 3,000 crore, as investments increased by Rs. 1,200 crore. The value of investment multiplier would be _________. (Choose the correct alternative to fill up the blank)</p>
(D) 5
<p>Total consumption expenditure by households under Keynesian Economics is a combination of __________ and __________. Choose the correct alternative to fill in the blanks)</p>
(D) Autonomous Consumption, Induced Consumption