EconomicsMacro Economics: Determination of Income and Employment

In a diagram of aggregate demand, the consumption line cuts the verti…

In a diagram of aggregate demand, the consumption line cuts the vertical axis at M, the investment line at J and the aggregate demand line at L; O is the origin. Match List-I with List-II:

List-I		List-II
(A)	OM	(I)	c
(B)	OJ	(II)	C̄ + Ī
(C)	OL	(III)	Ī
(D)	Slope of the aggregate demand line	(IV)	C̄

Choose the correct answer from the options given below:

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → (A) - (IV), (B) - (III), (C) - (II), (D) - (I)

In such a diagram, the AD line is the consumption line lifted up by the flat investment line.

List-I	List-II	Reason
(A) OM	(IV) C̄	M is where the consumption line starts: autonomous consumption.
(B) OJ	(III) Ī	J is the height of the flat investment line.
(C) OL	(II) C̄ + Ī	L is where AD starts: the sum of the two intercepts.
(D) Slope of the aggregate demand line	(I) c	AD is parallel to the consumption line, so its slope is c.

NCERT (2026-27): “Aggregate Demand: Graphical Representation The Aggregate Demand function shows the total demand (made up of consumption + investment) at each level of income. Graphically it means the aggregate demand function can be obtained by vertically adding the consumption and investment function.
Here, OM = C̄
OJ = Ī
OL = C̄ + Ī
The aggregate demand function is parallel to the consumption function i.e., they have the same slope c. It may be noted that this function shows ex ante demand.”