Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

Match List-I with List-II

List-I

List-II

(A) Ex-post investment

(I) AD function shifts upward

(B) Investment multiplier

(II) Planned Investment + Unplanned Investment

(C) Ex ante aggregate demand

(III) $1/1- MPC$

(D) Owing to increase in investment

(IV) $\bar I +\bar C + cY$

Choose the correct answer from the options given below:

Options:

(A)-(II), (B)-(III), (C)-(IV), (D)-(I)

(A)-(I), (B)-(III), (C)-(II), (D)-(IV)

(A)-(I), (B)-(II), (C)-(IV), (D)-(III)

(A)-(III), (B)-(IV), (C)-(I), (D)-(II)

Correct Answer:

(A)-(II), (B)-(III), (C)-(IV), (D)-(I)

Explanation:

The correct answer is Option (1) → (A)-(II), (B)-(III), (C)-(IV), (D)-(I)

(A) Ex-post investment(II) Planned Investment + Unplanned Investment. Ex-post investment includes both the investment firms planned to make and the inventory changes that occurred unintentionally, making it the sum of planned and unplanned investment.

(B) Investment multiplier(III) 1 / (1 − MPC). This is the standard formula for the investment multiplier in Keynesian economics, showing how initial investment leads to a multiplied increase in income.

(C) Ex-ante aggregate demand(IV) $\bar I +\bar C + cY$. This is the equation of the planned or ex-ante aggregate demand function, including autonomous investment, autonomous consumption, and the induced consumption based on income (cY).

(D) Owing to increase in investment(I) AD function shifts upward. When investment increases, the aggregate demand curve shifts upward because there is now more planned expenditure at every level of income.