Page 2 - Home Assignment

12. If in an economy planned investment is greater than 1
planned savings, what is the effect on national income?
13. If MPC = MPS, then value of multiplier is _______. (∞ / 1
1 /0 / 2)

(3- or 4-marks question)
14. Explain the changes that will take place when planned 3
aggregate demand is more than planned aggregate
supply.
15. Explain the changes that will take place when planned 3
investment is less than planned savings.
16. If in an economy saving function is given by 4
= −50 + 0.2 and autonomous investment is 50.
Obtain the
a. break-even level of national income.
b. Equilibrium level of national income.

(6-marks question)
17. With the help of a schedule explain how the equilibrium 6
level of national income is determined in AD-AS
approach.
18. With the help of a schedule explain the working of 6
multiplier.

19. Define the following using diagram. 6
i. Full employment equilibrium.
ii. Under-employment equilibrium.
iii. Over full employment equilibrium.