Class 11 Exam > Class 11 Questions > If autonomous consumption expenditures by the...
Start Learning for Free
If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion?
Most Upvoted Answer
If autonomous consumption expenditures by the government increases by ...
Answer:
Given Information:
- Autonomous consumption expenditures by the government increased by Rs 5,000
- Half of the income is always spent on the purchase of goods for consumption
Solution:
Autonomous consumption expenditures refer to government spending that is not influenced by the level of income. When the government spends more, it increases the total spending in the economy, leading to an increase in the equilibrium GDP. The increase in autonomous consumption expenditure by the government of Rs 5,000 will lead to an increase in the equilibrium GDP by a certain amount. The increase in equilibrium GDP can be calculated using the multiplier formula:
Multiplier = 1 / (1 - MPC)
where MPC (Marginal Propensity to Consume) is the fraction of additional income that is spent on the purchase of goods for consumption.
Given that half of the income is always spent on the purchase of goods for consumption, MPC would be 0.5.
Therefore, the multiplier would be:
Multiplier = 1 / (1 - 0.5) = 2
Using the multiplier formula, we can determine the increase in equilibrium GDP:
Increase in Equilibrium GDP = Multiplier x Increase in Autonomous Consumption Expenditure
Increase in Equilibrium GDP = 2 x Rs 5,000 = Rs 10,000
Therefore, the increase in equilibrium GDP would be Rs 10,000 when autonomous consumption expenditures by the government increase by Rs 5,000.
Conclusion:
It can be concluded that an increase in autonomous consumption expenditures by the government led to an increase in equilibrium GDP. The increase in equilibrium GDP was determined using the multiplier formula, which takes into account the marginal propensity to consume. The multiplier formula is an important tool in determining the impact of changes in autonomous expenditures on the equilibrium GDP.
Attention Class 11 Students!
To make sure you are not studying endlessly, EduRev has designed Class 11 study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in Class 11.
|
Explore Courses for Class 11 exam
|
|
Similar Class 11 Doubts
Top Courses for Class 11View all
If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion?
Question Description
If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? for Class 11 2024 is part of Class 11 preparation. The Question and answers have been prepared according to the Class 11 exam syllabus. Information about If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? covers all topics & solutions for Class 11 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion?.
If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? for Class 11 2024 is part of Class 11 preparation. The Question and answers have been prepared according to the Class 11 exam syllabus. Information about If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? covers all topics & solutions for Class 11 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion?.
Solutions for If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? in English & in Hindi are available as part of our courses for Class 11.
Download more important topics, notes, lectures and mock test series for Class 11 Exam by signing up for free.
Here you can find the meaning of If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? defined & explained in the simplest way possible. Besides giving the explanation of
If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion?, a detailed solution for If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? has been provided alongside types of If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? theory, EduRev gives you an
ample number of questions to practice If autonomous consumption expenditures by the government increases by rs 5,000.find increasse in equilibrium gdp when half of the income is always spent on the purchase of goods for consumpion? tests, examples and also practice Class 11 tests.
|
|
Explore Courses for Class 11 exam
|
|
Suggested Free Tests
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup