Chapter 4 Part 2 - Income Determination and Multiplier

Economics Class 12
Macroeconomics

### Example 26

The saving function of an economy is S = - 200 + 0.25Y. The economy is in Solarium level when income is equal to 2,000. Calculate:

1. Investment expenditure at equilibrium of income;
2. Autonomous consumption;
3. Investment multiplier.

### Example 27

If saving function for an economy is given as: S = when - 500 + 0.2Y will and become investment expenditure is ₹ 100 crores, then determine:

1. Level of income when saving will become zero
2. Level of income when saving is equal to investment.

## What is Break Even level of Income?

It is level of income where we are earning enough to meet out consumption

Hence at this level

Income = Consumption

## Note

Savings are 0 at this level

### Example 28

The equilibrium level of income in an economy is ₹ 5,000 crores. The autonomous consumption expenditure is equal to ₹ 250 crores and investment expenditure ₹ 1,000 crores Calculate:

1. Consumption expenditure at equilibrium level of national income;
2. Marginal Propensity to save;
3. Saving Function;
4. Investment Multiplier;
5. Break-even level of Income.

### Example 32

The saving function of an economy is given as: S = - 25 + 0-25 Y. If the planned investment is ₹ 200 crores, calculate the following:

1. Equilibrium level of income in the economy.
2. Aggregate demand at income of ₹ 500 crores.

### Example 33

The saving function of an economy is given as: S = (-) 10 + 0-20 Y. If the ex-ante investments are ₹ 240 crores,

calculate the following:

1. Equilibrium level of income in the economy.
2. Additional investments which will be needed to double the present level of equilibrium income.

### NCERT Questions

No questions in this part

### Other Books

#### Question 1

The function of saving (S) is given to be: S = -40 + 0.25Y.

If planned investments are Rs100 crores, determine:

1. Equilibrium level of income;
2. Level of consumption at equilibrium;
3. Savings at equilibrium

#### Question 2

The saving function of an economy is given as: S = -50 + 0.4Y.

The economy is in equilibrium at the income level of Rs 1,500 crores.

Calculate:

1. Investment at equilibrium income level;
2. Autonomous consumption;
3. Multiplier

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