Suppose autonomous investment and consumption expenditure (A) in a hypothetical economy is ₹50 crores, MPS is 0.2 and the level of income is ₹4000 crores. The value of ex-ante aggregate demand would be................
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 3250
Given:
Autonomous expenditure, A = ₹50 crores
Marginal propensity to save, MPS = 0.2
Income, Y = ₹4000 crores
Ex ante aggregate demand is planned spending, AD = A + cY. Here c is the marginal propensity to consume, and c = 1 − MPS.
c = 1 − 0.2 = 0.8
AD = 50 + 0.8 × 4000
AD = 50 + 3200
AD = ₹3250 crores
Note: This question is an end-of-chapter exercise of the chapter ‘Determination of Income and Employment’ of the NCERT book, with the same figures. NTA kept only its first part. End-of-chapter exercises deserve a place in your revision too.
NCERT (2026-27): Introductory Macroeconomics — Chapter 4: Determination of Income and Employment
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