Chapter 4 Part 2 - Income Determination and Multiplier

Class 12 NCERT
Macroeconomics

We know that

At equilibrium level

In this case,

Savings are also equal to Investment

S = I ## Reason

Aggregate Demand = Consumption Expenditure + Investment Expenditure

Aggregate Supply = Consumption + Saving

AS = C + S

Now, we know that

At equilibrium level

hence, we can write

C + I = C + S

Cancelling C

I = S

Investment = Savings

Lets learn how to make Schedule using this approach

## How to Make Schedule Graph of Savings  ## How to Make Schedule Graph of investment  Now lets make both Savings and Investment in Same graph

## Graph of Savings and Investment On X Axis, we show Income

On Y Axis, we show Savings and Investment

It can be Seen that

Savings curve is Positively Sloping Starting from Point Y

It starts below the origin as at level of income, Savings are negative

Investment Curve is Parallel to X Axis

It is because Investment is Assumed to be Autonomous Investment

Investment Amount does not change with increase in Income

Point where Savings and Investment Curve intersect is called Equilibrium Point

We Say, at equilibrium Point, Savings=investment

At this Point, we draw a line EY connecting x axis at Point Y

This Y is equilibrium Level of income  ### NCERT Questions

No questions in this part\

### Other Books

#### Question 1

How is equilibrium level of income attained through savings and investment approach? 