Practice Macroeconomic Equilibrium With Price Level Fixed (4.3.1) - Determination of Income and Employment

Practice: Macroeconomic Equilibrium with Price Level Fixed

Lesson 4.3.1Determination of Income and Employment

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10 questions

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6 sample questions

Question 1.
What is the definition of macroeconomic equilibrium?
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Think about the balance in economic terms.
Question 2.
Explain the term 'marginal propensity to consume'.
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It's about what you do with extra money.
3Question 3.
What does the term 'aggregate demand' refer to?
- Total supply of goods
- Total demand for final goods and services
- Total savings in an economy
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Think about what drives economic activity.
4Question 4.
True or False: The equilibrium income changes when the price level is fixed.
- True
- False
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Consider the factor that remains constant.
Question 5.
If the economy's autonomous consumption is Rs. 150, investment is fixed at Rs. 200, and the marginal propensity to consume is 0.6, derive the equilibrium income using the relevant formula.
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Remember to add consumption and investment values first before applying the formula.
Question 6.
Discuss the implications of a sudden rise in consumer confidence that leads to a 25% increase in autonomous consumption. Calculate the new equilibrium income if the marginal propensity to consume remains at 0.9.
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Consider how increased spending can amplify overall economic output using the multiplier effect.

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