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:
Answer & explanation
Correct answer: option 1
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.