Assuming for a hypothetical economy, the following data is given :
Income (Y) Consumption (C) Investment (I) Aggregate Demand (AD) 0 20 20 40 100 100 20 – 200 180 20 – 300 260 20 280
Calculate the missing values in the given schedule.
Assuming for a hypothetical economy, the following data is given :
| Income (Y) | Consumption (C) | Investment (I) | Aggregate Demand (AD) |
|---|---|---|---|
| 0 | 20 | 20 | 40 |
| 100 | 100 | 20 | – |
| 200 | 180 | 20 | – |
| 300 | 260 | 20 | 280 |
Calculate the missing values in the given schedule.
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Solution and Explanation
In a two-sector economy, aggregate demand is the sum of consumption and investment.
\[ AD = C + I \]
Step 2: Check the formula on a complete row:
At Y = 0, C = 20 and I = 20, so AD = 20 + 20 = 40. This matches the table.
At Y = 300, C = 260 and I = 20, so AD = 260 + 20 = 280. This also matches, so the formula is right.
Step 3: Find the missing value at Y = 100:
C = 100 and I = 20.
\[ AD = 100 + 20 = 120 \]
Step 4: Find the missing value at Y = 200:
C = 180 and I = 20.
\[ AD = 180 + 20 = 200 \]
Step 5: Fill the schedule and check the pattern:
The completed AD column reads 40, 120, 200 and 280.
Consumption rises by 80 for every 100 rise in income, and investment stays at 20. So AD also rises by 80 each time, which agrees with our values.
Final Answer:
The missing values of aggregate demand are 120 (at Y = 100) and 200 (at Y = 200). \[ \boxed{AD = 120 \text{ and } 200} \]
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