Macroeconomics: Determination of Income and Employment · Class 12 · CBSE · Commerce Economics
Explain how an increase in autonomous investment leads to a multiplied increase in equilibrium income.
Practice question from Macroeconomics: Determination of Income and Employment (Class 12 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · Subjective · Q-5D54E9
Explain how an increase in autonomous investment leads to a multiplied increase in equilibrium income.
Solution
The multiplier process occurs because one person's expenditure becomes another person's income. Since each round generates additional consumption expenditure, the final change in income exceeds the initial change in autonomous investment.
More from Macroeconomics: Determination of Income and Employment
- In a two-sector economy, equilibrium level of income is determined at the level where:
- The marginal propensity to consume in an economy is 0.75. If autonomous investment increases by ₹200 crore, the equilibrium income will inc…
- Which combination of measures is most appropriate for correcting deficient demand in an economy?
- The consumption function of an economy is C = ₹100 crore + 0.8Y. At what level of income will saving be zero?
Practise more Economics
Sign up free for adaptive practice on this chapter, with instant feedback and hints on every question.
Start practising freeFree to start · No credit card needed