Chapter8 = Income Determination and Multiplier lecal 10. Calculate MPC and Multiplier (k) from the following data: Tsu 100 200 300 Consumption 80 160 250 {MPC: -, 0.80, 0.90; k:~, 5, 10) 11, The consumption function of an economy is given as: C = 40 + 0.8Y, Calculate the total increase in income and consumption if investment expenditure increases by ® 500 crores. {increase in Income = ®2,500 crores; Increase in Consumption = @ 2,000 crores} 12, Inan economy, the investment expenditure is increased by % 2,000 crores. Calculate the total increase in income and consumption expenditure if ratio of marginal propensity to consume and marginal propensity tosaveis4:1. {Increase in Income = ® 10,000 crores; Increase in Consumption Expenditure = €8,000 crores} 13. Inan economy, people always consume half of any additional income and save the other half. Determine the additional income generated if government makes an additional expenditure of € 20,000 crores. {Additional income Generated = € 40,000 crores) 14, Inan economy, with every increasein income, 70 per cent of the increased income is spent on consumption. Suppose a fresh investment of 300 crores takes place in the economy. Calculate the following: () Change in the income; (i) Change in saving. (CBSE. Allindia Comptt. 2008 ()} {@) Change in income = & 1,000 crores; i) Change in saving = @300 crores} 15. If consumption function for an economy is given as: C= 120 + 0.9Y, then what is the value of m 2 (Multiplier = 10) 16. If consumption at zero level of income is 40 crores and investment multiplier is 4, then determine the relevant consumption function. (C=40+075¥} 17, Itis planned to increase national income by @ 1,000 crores. How much increase in investment is required to achieve this goal? Assume that marginal propensity to consume is 0.6. Calculate. (CBSE, Foreign 2008 ()} 400 crores) Practcalson Determination of Equilibrium Level 18. Calculate AD, AS for every level of income and the equilibrium level, from the following schedule: (assuming that the investment is fixed at ® 40 crores) ne 100 | 200 300 400 500 600 foretench) 120 | 200 280 360 440 520 {AD: 160, 240, 320, 400, 480, 560; AS: 100, 200, 300, 400, 500, 600; Equilibrium level of income: €400 crores) 19. Calculate aggregate demand (AD), aggregate supply (AS) for all levels and the equilibrium level of income from the given schedule, if the investment is fixed at € 20 crores: iene o | 10 | 20 | 30 | 40 | so | 60 | 70 | 20 | 90 | 100 ein 20 | 25 | 30 | 35 | 40 | 45 | so | 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: €80 crores) 20. In a two-sector economy, the income and consumption functions are: Y = C + | and C = 50 + 0.80Y. If the investments are & 50 crores, calculate: (a) Equilibrium level of income; (b) Level of consumption at equilibrium; (0) Saving at equilibrium. {(a) ® 500 crores; (b) €450 crores; (c) ® 50 crores) Scanned with CamScannerEe Introductory Macroeconomics 21, Thefunction of saving (S)is given to be:S = - 40 + 0.25Y. Ifplanned investments are % 100 crores, determine; {@) Equilibrium level of income; (b) Level of consumption at equilibrium; (c) Saving at equilibrium. {(a) ®560 crores; (b) 8460 crores; (c) € 100 crores} 22, The saving function of an economy is given as: S = -50+0.4Y. The economy is in equilibrium at the income level of & 1,500 crores. Calculate: (a) Investment at equilibrium income level; (b) Autonomous consumption; (©) Multiplier. (a) 550 crores; (b)® 50 crores; (c) 2.5} 23, The consumption function is expressed as: C = 100 + 0.25Y (where C = consumption expenditure and ‘Y= National Income). Calculate saving if consumption expenditure at equilibrium level of national income is €500 crores. {Saving = €1,100 crores} 24, The consumption function of an economy is given as: C = 200 + 0.75Y, If planned investments are € 500 crores, calculate equilibrium level of national income. {2,800 crores} 25. In an economy, the consumption function is C = 600 + 0.9Y, where C is consumption expenditure and Y is income. Calculate the equilibrium level of income and consumption expenditure, when investment expenditure is 500. (CBSE, Foreign 2010 (W)} {Equilibrium level of income = 11,000; Consumption expenditure = 10,500} 26, InaneconomyS=-S0+0:Yisthe saving function (where $= saving and =national income) and investment expenditure is & 7,000. Calculate: (i) Equilibrium level of national income. (i) Consumption expenditure at equilibrium level of national income. (CBSE, All india 2009} {0 14,100; i) €7,100} 27. Inan economy, C= 300+0.8Y and1=% 500 (where C= Consumption, Y=Income, |=Investment).Calculate the following: (a) Equilibrium level of income; (b) Consumption expenditure at equilibrium level of income. {CBSE, All ndia (C) 2008 (0) (a) &4,000; (b) & 3,500} 28, The consumption function is given as C = 75 + 0.75Y and autonomous investment is % 100 crore. Derive the saving function and calculate the level of income at which saving is equal to investment. {Saving Function: S=~75 + 0.25¥; Level ofincome = € 700 crore} 29. Answer the following questions based on the data given below: Planned level of investment =¥ 200 crores C=100+08Y (@) Determine the Equilibrium Level of Income. (b) Calculate the saving & consumption expenditure at equilibrium level of income, (CBSE, 2020(58/3/2)? f(a) ® 1,500 crores; (b) Saving = ® 200 crores; Consumption Expenditure = ® 1,300 crores} Miscellaneous Questions 30, Inan economy, the marginal propensity to save is 0.25. Investment is increased by € 200 crores. Calculate the total increase in income and consumption expenditure. {CBSE, All india (C) 2004) £800 crores; €600 crores} 31. Byincrease in investment of € 100 crores, national income of a country increases by € 250 crores. Find out the marginal propensity to consume. (CBSE, Delhi (C) 2004) {0.60} Scanned with CamScannerChapter8 = Income Determination and Multiplier 32, IFincrease in investment is 125 crores and increase in national income is % 500 crores, calculate marginal propensity to save. CBSE, All ndia (C) 2004} £025) 33, An increase in investment in a country leads to increase in national income by % 200 crores. If marginal propensity to consume is 0.75, what is the increase in investment? Calculate. {CBSE, Allindia 2007} 50 crores} 34, In an economy, marginal propensity to save is 0.10. How much increase in investment is required so that national income rises by % 400 crores? {CBSE. All India (C) 2005} (40 crores} 35, Inaneconomy investment increases by % 600 crores. f marginal propensity to consume is 0.7, what is the increase in total national income? {CBSE, All ndia (C) 2006} £22,000 crores} 36. Given marginal propensity to save 0.25, what will be the increase in national income ifinvestment increases by 125 crores. Calculate. (CBSE, Allindia 2008} {500 crores} 37. Asaresult of increase in investment by % 60 crore, national income rises by % 240 crore. Calculate marginal propensity to consume. {CBSE, All ndia 2011 ()} 10.75} 38. Answer the following questions based on the data given below: {CBSE, 2020 (58/5/1)} Planned Investments = 100 crores C=50+050Y {a) Determine the equilibrium level of income. (b) Calculate the value of Savings at equilibrium level of National Income. (©) Calculate the value of Investment Multiplier. {(a) % 300 crores; (b) % 100 crores; (c) 2} 39. An increase in investment by & 400 crores leads to increase in National Income by & 1,600 crores. Calculate marginal propensity to consume. {CBSE, Foreign 2008 ()} {0.75} 40. Inaneconomy the marginal propensity to consumeis0.75. Investment expenditure in the economy increases by 275 crores. Calculate the total increase in national income. {CBSE Allindia 2011 (0) {%300 crores} 41. Aneconomyisin equilibrium. Its consumption function is C = 300 + 0.8Y where Cis consumption expenditure and is income and investment is ® 700. Find national income. (CBSE, Foreign 2011 (I) {25,000} ‘42. An economy is in equilibrium. Its national is € 5,000 and autonomous consumption expenditure is € 500. What is the total consumption expenditure if marginal propensity to consumer is 0.7? (CBSE, Foreign 2011 (ll)} {4,000} 43. Find’investment from the following: National Income =% 500; Autonomous consumption =% 100; Marginal propensity to consume =0.75. {CBSE, Delhi 2012 (1)) {825} ‘44, Find consumption expenditure from the following: Autonomous consumption =% 100; Marginal propensity to consume = 0.70; National Income = 1,000. (CBSE, Delhi 2012 (t)) (800) Scanned with CamScanner8.48 i Introductory Macroeconomics 45. C= 100 + 0.4Y is the Consumption Function of an economy, where C is Consumption Expenditure and y is National Income. Investment expenditure Is 1,100. Calculate: (i) Equilibrium level of National Income; (ii) Consumption expenditure at equilibrium level of national income. (CBSE, Delhi 2013 (yy {0 2,000; (ii) 900} 46, S=~60+0.1 Vis the saving function, where Sis Saving and is National Income and Investment Expenditure (1) is 4,000 crore in an economy. Calculate the Equilibrium level of Income. (CBSE, 2022 (58/4/1) Term-2} {Equilibrium level of Income = 40,600 crore} 47. From the data given below about an economy, calculate: (a) investment expenditure; and (b) consumption expenditure. (CBSE, All india 2013 ()) (Equilibrium level of income 5,000 (ii) Autonomous consumption 500 (iii) Marginal propensity to consume 04 (a) 2,500; (6) 2,500} 48. In an economy C = 200 + 0.75Y is the consumption function where C is consumption expenditure and Y is national income. Investment expenditure is 4,000. Calculate equilibrium level of income and consumption expenditure. {CBSE, All india 2013 (1)} {Equilibrium level of income = 16,800; Consumption Expenditure = 12,800} 49. An Economy is in equilibrium, calculate the Marginal Propensity to Save (MPS) from the following: (CBSE, 2022 (58/5/1) Term-2} (i) National Income (Y) 74400 (i) Autonomous Consumption (©) 1,000 Gi) Investment Expenditure (1) %70 (Marginal Propensity to Save (MPS) = 0.24} 50. Calculate ‘Investment’ from the following: (CBSE, Delhi Comptt. 2013 (D} () Equilibrium income 500 (i) Consumption expenditure at zero income 50 Gi). Marginal propensity to consume 07 {investment = € 100} 51. Calculate Marginal Propensity to Consume from the following: {CBSE, Delhi Comptt. 2013 (W)} (Equilibrium income 7350 (i) Consumption expenditure at zero income %20 Gi) Investment %50 (Marginal Propensity to Consume = 0.8} 52. Calculate equilibrium level of income from the following: {CBSE, Delhi Compt. 2013 (ul) () Consumption expenditure at zero income 40 (i) Marginal Propensity to Consume 08 (ii) investment %80 {Equilibrium level of income = %600} 53. Calculate change in income (AY) for a hypothetical economy, for which it is given that: () Marginal Propensity to Consume (MPC) = 0.75, and (ii) Change in Investments (Al) = € 20,000 crores. {CBSE, 2022 (58/1/1) Term-2} {Change in Income (AY) = €80,000 crores} 54, Calculate Marginal Propensity to consume from the following: {CBSE, All ndia Comptt. 2013 (1) (0 Consumption expenditure at zero income %70 (ii) Equilibrium income 2700 (ii) Investment %140 (Marginal Propensity to Consume = 0.7} Scanned with CamScannerChapter8 = Income Determination and Multiplier 55, Calculate investment expenditure of an economy which is in equilibrium: {CBSE, Delhi 2014 ()) National income = 1 Marginal propensity to save = 0.25 Autonomous consumption expenditure = 2200 Unvestment Expenditure = 50} 56. Calculate autonomous consumption expenditure from the following date about an economy which is in equilibrium. (CBSE, Delhi 2014 (1)) National income = = ©1200 Marginal propensity to save = 0.20 Investment expenditure = 100 {Autonomous Consumption Expenditure = 140) 57. Calculate marginal propensity to consume of an economy which isin equilibrium. {CBSE, Delhi 2014 ()) National Income = 1,500 ‘Autonomous Consumption Expenditure = 2300 Investment Expenditure = %300 {Marginal Propensity to Consume = 0.6) 58, Calculate Marginal Propensity to Consume from the following data about an economy whichiisin equilibrium: {CBSE, All India 2014 ()} National income = — %2,000 Autonomous consumption expenditure = 200 Investment expenditure = 2100 {Marginal Propensity to Consume = 0.85} 59. From the following data about an economy, calculate its equilibrium level of income: {CBSE, Delhi Comptt. 2014 (II)} Marginal Propensity to Consume = 05 Autonomous Consumption Expenditure = %300 Investment Expenditure = 76,000 {Equilibrium Level of Income = % 12,600} 60. In an economy the autonomous Investment Is 100 and the consumption is C = 80 + 0.4Y. Is the economy in equilibrium at an income level 400? Justify your answer. {CBSE, Sample Paper 2015} {Equilibrium Income eq :00; As given income of 400 is greater than equilibrium level of income, the economy is not at ium. tis ata situation where AD is greater than aggregate output produced in the economy} 61. In an economy the autonomous investment is 60 and the marginal propensity to consume is 0.8. If the equilibrium level of income Is 400, then the autonomous consumption is 30. True or False? Justify your answer. (CBSE, Sample Paper 2015) {False. The given value of autonomous consumption is incorrect. The correct value is 20} 62. An economy is in equilibrium. Calculate national income from the following: {CBSE, Delhi 2015 ()} ‘Autonomous consumption = 100 Marginal propensity to save = 02 Investment expenditure = 200 {National Income = 1,500} 63, An economy isin equilibrium. Find Marginal Propensity to Consume from the following: {CBSE, Delhi 2015 ()} National income . 2,000 Autonomous consumption = 400 Investment expenditure = {Marginal Propensity to Consume = 0.7} Scanned with CamScanner64, An economy is in equilibrium. Calculate Investment Expenditure from the following: (CBSE, All India 2015 (1)} National income = 800 Marginal propensity to save = 03 Autonomous Consumption = 100 {investment Expenditure = 140} 65. An economy isin equilibrium. Calculate the Marginal Propensity to Save from the following: {CBSE, All India 2015 (i)} National income = 1,000 ‘Autonomous Consumption = 100 Investment = 120 {Marginal Propensity to Save = 0.22} 66. An economy is in equilibrium. Calculate Autonomous Consumption. {CBSE, Foreign 2015 (II) National Income = 1,250 Marginal Propensity to Save = 02 Investment Expenditure = 150 fAutonomous Consumption = 100} 67. S =-100 + 0.2 Y is the saving function in an economy. Investment expenditure is 5,000. Calculate the equilibrium level of income. {CBSE, Delhi Comptt. 2015 ()} {Equilibrium Level of Income = 25,500} 68. Estimate the value of ex-ante AD, when autonomous investment and consumption expenditure (A) is % 60 ‘crores and MPC is 0.8 and level of income is & 500 crores. {CBSE, Delhi & Al Compt. 2022 (i!)} {Ex-ante AD = %460 crores} 69. Inan economy, investmentincreases from 300 to 500. Asa result of this, equilibrium level ofincome increases by 2,000. Calculate the marginal propensity to consume. {CBSE, All India Comptt. 2015 ()} {Marginal Propensity to Consume = 0.9} 70. In an economy, 20 percent of increased income is saved. How much will be the increase in income if investment increases by 10,000? Calculate. {CBSE, All India Comptt. 2015 (1)} {increase in Income = 50,000} 71. Suppose marginal propensity to consume is 0.8, How much increase in investment is required to increase national income by ® 2,000 crore? Calculate. (CBSE, Delhi 2016 ()} {Increase in Investment = % 400 Crore} 72. An economy is in equilibrium. Calculate Autonomous Consumption Expenditure: (CBSE, All ndia 2016 ()} National Income = 1,600 Investment Expenditure = 300 Marginal Propensity to Consume = 08 {Autonomous Consumption Expenditure = 20} 73. Calculate equilibrium level of income for a hypothetical economy, for which it is given that: () Autonomous Investment (1,) = % 2,500 crores, and (i) Consumption Function; C = 1,000 + 0.8Y Where C = Consumption and Y = Income. {CBSE, 2022 (58/1/1) Term-2} {Equilibrium Level of income = & 17,500 crores} 74, From the following data calculate the equilibrium level of national income: —_{CBSE, Delhi Comptt. 2016 (1)} ‘Autonomous Consumption ei 500 Marginal Propensity to Save = 02 Investment = 2,000 {Equilibrium Level of National Income = 12,500} Scanned with CamScannerChapter8 = Income Determination and Multiplier lal 75. Calculate consumption expenditure in the economy whose equilibrium level of income is 20,000, autonomous consumption is 500 and marginal propensity to save is 0.5. (CBSE, Ail india Comptt. 2016 (1il)} {Consumption Expenditure = 10,500} 76. An economy Is in equilibrium. From the following data about an economy, calculate autonomous consumption. (CBSE, Delhi 2017 (9) Income = 5,000 Marginal Propensity to Save 02 Investment Expenditure 800 {Autonomous Consumption = 200} 77. An economy is in equilibrium. From the following data, calculate the marginal propensity to save: {CBSE, All India 2017} Income = 10,000 Autonomous consumption = 500 Consumption expenditure = 8,000 {Marginal Propensity to Save = 0.25} 78. Ina hypothetical economy, when savings are zero, itis given that: (CBSE, Delhi & Al Comptt. 2022 (,ll)} (@) Level of Income = € 100 crore, and (b) Autonomous Consumption (€) = 40 crore. Calculate the value of Marginal Propensity to Consume (MPC) in the economy. {Marginal Propensity to Consume (MPC) = 0.6) 79. In an economy, investment increased by 1,100 and as a result of it, income increased by 5,500. Had the marginal propensity to save been 25 percent, what would have been the increase in income? {CBSE, Foreign 2017} {increase in Income = 4,400} 80. If marginal propensity to consume is 0.8, how much will be the value of investment multiplier? Calculate. {CBSE, Delhi Comptt. 2017 ()} investment Multiplier = 5} 81. Ifin an economy: (a) Consumption function is given by C= 100+ 0.75 Y and (b) Autonomous Investmentis 150 crores, Estimate (i) Equilibrium level of Income and (i) Consumption and Savings at the Equilibrium Level of Income. {CBSE, Sample Paper 2017} {) 71,000 crores; (i) Consumption = %850 crores, Savings = 150 crores} 82. Ifin an economy, C= 500 + 0.9Y and |= 1,000 crores, where C = Consumption Expenditure, Y = National Income, | = Investment. Calculate the following: (i) Equilibrium Level of Income; (i) Value of Investment Multiplier. (CBSE, Delhi Comptt. 2018} £0) 815,000 crores; (i) 10} 83. Inan economy C= 200 + 0.5 Ys the consumption function where Cs the consumption expenditure and Y is the national income. Investment expenditure is & 400 crores. Is the economy in equilibrium at an income level @ 1,500 crores? Justify your answer, {CBSE, Sample Paper 2019) {Equilibrium level of income = ® 1,200 crores. So, economy is not in equilibrium at given income of © 1,500 crores} 184, Ifin an economy: ‘Change in initial Investments (Al) = 1,000 crores Marginal Propensity to Save (MPS) = 0.2 Find the values of the following: (a) Investment Multiplier (k); (b) Change in Final Income (AY), (CBSE, 2020 (58/2/1)) €(a) 5; (b) 85,000 crores) Scanned with CamScannerey Introductory Macroeconomics 85. Given the following information, identify whether the economy is in equilibrium or not. (CBSE, 2020 (58/4/2)) ()_ Autonomous Consumption and Investment Expenditure 200 crores (il) Marginal Propensity to Consume (MPC) 0.70 (lii)_ National income 1,000 crores {Economy is not in equilibrium as AD (% 900 crores) < AS (% 1,000 crores)} 86. The saving function of an economy is given as:S =(-) 50 + 0-10. Ifthe ex-ante Investments are 450 crores, calculate the following: (i) Equilibrium level of income in the economy. (ii) Additional investments which will be needed to gain an additional income level of % 3,000 crores. {CBSE, All India 2019 (1M); {(i) % 5,000 crores; (ii) ¥ 300 crores} 87. The saving function of an economy is given as: S = -250 + 0.25 Y. Ifthe planned investment is € 2,000 crores, calculate the following: {CBSE, Delhi Comptt. 2019 (I)} (a) Equilibrium level of income in the economy. (b) Aggregate demand at income of ® 5,000 crores. {(a) € 9,000 crores; (b) € 6,000 crores} 88. Suppose in a hypothetical economy, the savings increase by ¥ 20 crores when national income increases by 100 crores. Compute the additional investments needed to attain an increase in national income by %6,000 crores. {CBSE, Sample Paper 2020} £1,200 crores} 89. In an economy, investment increases by & 1,000 crore and marginal propensity to save is 0.25. Calculate: () Investment Multiplier (k) (ii) Total increase in Income (AY) (CBSE, Delhi & Al Compt. 2021} {(i) 4; (i) 4,000 crores} 90. From the following data, calculate the (a) Consumption Expenditure and (b) Investment Expenditure for the economy. (CBSE, Delhi & Al Compt. 2020} (i)_ Equilibrium Level of Income %5,000 crores {li)_ Autonomous Consumption 500 crores (iii)_ Marginal Propensity to Save 0.4 ((a) % 3,500 crores; (b) € 1,500 crores} Scanned with CamScanner