Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

In an Economy, AD = ₹250cr + 0.6Y and at zero level of income consumption is ₹150 crores. The autonomous investment will be:

Options:

₹100 cr.

₹150 cr.

₹50cr.

₹200 cr.

Correct Answer:

₹100 cr.

Explanation:

AD = C + I

or

AD = c̅ + bY + I

According to the question, autonomous consumption (c̅) i.e. consumption at zero level of income - ₹150 crores

AD = ₹250 cr + 0.6Y or AD = c̅ + bY + I

so, by comparing both equations  c̅ + I = ₹250 cr

₹150 crores + I = ₹250 cr

I = ₹250 cr - ₹150 crores 

I = ₹100 crores 

Thus, we can say that the autonomous investment is ₹100 crores