NCERT MOST IMPORTANT QUESTIONS CLASS – 12 | MACROECONOMICS IMPORTANT QUESTIONS | AGGREGATE DEMAND AND ITS RELATED CONCEPT | EDUGROWN |

In This Post we are  providing AGGREGATE DEMAND AND ITS RELATED CONCEPT NCERT MOST IMPORTANT QUESTIONS for Class 12 MACROECONOMICS which will be beneficial for students. These solutions are updated according to 2021-22 syllabus. These MCQS  can be really helpful in the preparation of Board exams and will provide you with a brief knowledge of the chapter

NCERT MOST IMPORTANT QUESTIONS ON AGGREGATE DEMAND AND ITS RELATED CONCEPT

1. Define Marginal Propensity to Consume.
Ans. The ratio between the change in consumption expenditure with the change in income is called Marginal Propensity to Consume.

2. Give the meaning of Marginal Propensity to Save.  
or
Define Marginal Propensity to Save.              (All India 2009; Delhi 2008C)
Ans. Marginal Propensity to Save is the ratio of change in saving with the change in income.

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3. Give the meaning of Aggregate Demand.
or
Define Aggregate Demand.      
Ans. The sum, total of the demand for all the goods and services in an economy during an accounting year is termed as Aggregate Demand of the economy. Aggregate Demand of an economy is measured in terms of the (expected) Total Expenditure on all products (goods and services) in the economy during an accounting year.

4. (i) Distinguish between autonomous investment and induced investment.
(ii) On the basis of the following information about an economy, Calculate its equilibrium level of income     
Autonomous Consumption                                = Rs. 100
Marginal Propensity to Consume                    = 0.75
Investment                                                               = Rs. 5000
Ans. (i) Differece between autonomous investment and induced investment

5.  (i) Distinguish between Aggregate Demand and Aggregate Supply.
(ii) From the following data about aneconomy, calculate its equilibrium level of income
Marginal Propensity to Consume    =    0.8
Investment                                               = Rs.  5000
Autonomous Consumption               = Rs. 500

6. Complete the following table  

7. C = 100 + 0. AY is the consumption function of an economy, where C is consumption expenditure and Vis National Income. Investment expenditure is Rs. 1100. Calculate
(i) Equilibrium level of National Income.
(ii) Consumption expenditure at equilibrium level of National Income.                                                
Ans. Given,                                 C =100 + 0.4Y
l= Rs. 1100
(i) Equilibrium level of National Income
Y=C + I
Y= 100 + 0.4Y+1100
Y- 4Y = 100+1100
–                                                  0.6Y = 1200
Y= 1200/ 6
Y= Rs. 200
(ii) Consumption expenditure at equilibrium level of income
C = 100 + o.4y
C =100 + 0 .4 x 2000
C = 100 + 800=900
C =  Rs.900

8. C= 50+ 0. 5Y is the consumption function of an economy, where C is consumption expenditure and Y is National Income and investment expenditure is Rs. 2000 in an economy. Calculate
(i) Equilibrium level of National Income.
(ii) Consumption expenditure at equilibrium level of National Income.                                                                     
Ans.               Y = C + l   or  C+5
Given,            C = 50+0.5Y
l=Rs. 2000
(i) Equilibrium level of National Income
Y= C + I
Y= 50 +0.5y + 2000
0.5 Y= 50 + 2000 =2050/0.5
Y = Rs. 4100      (therefore, National Income =Rs. 4100)
(ii) Consumption expenditure at equilibrium level of National Income
C = 50 + 05y
C = 50 +05×4100
C= 50 + 2050
C= Rs. 2100          (therefore, Consumption expenditure =Rs. 2100)

9. Explain consumption function, with the help of a schedule and diagram. 
Ans. The functional relationship between the consumption expenditure and the income is known as consumption function.
C = f(Y), Where C = Consumption expenditure,
y = Income, and f = Functional relationship.
Consumption function in terms of an algebraic expression can be written as



The point B represents the break even point, where the consumption expenditure equals the income. To the left of point B, consumption is greater than income and to the right of point B, consumption is less than income

10. Explain saving function with the help of a schedule and diagram.
                                                                                                             
Ans. The functional relationship between the savings and income is known as saving function.
S = f (Y), Where S = Saving, Y = Income and f = Functional relationship.
Saving function as an algebraic expression, can be written as

Point E represents the break even point where income is equal to consumption hence, saving is equal to zero. To the left of point E, there is negative savings or dissavings (represents the situation when income is less then consumption), to the right of E, there is positive savings (represents the situation when income is greater than consumption).