Read the following statements carefully:
Statement 1: Expost savings and Expost investments are equal at all levels of income.
Statement 2: Under the effective demand principle, the equilibrium output is equal to exante Aggregate Demand (AD). In the light of the given statements, choose the correct alternative from the following:
Read the following statements carefully:
Statement 1: Expost savings and Expost investments are equal at all levels of income.
Statement 2: Under the effective demand principle, the equilibrium output is equal to exante Aggregate Demand (AD). In the light of the given statements, choose the correct alternative from the following:
Show Hint
- Statement 1 is true and Statement 2 is false.
- Statement 1 is false and Statement 2 is true.
- Both Statements 1 and 2 are true.
- Both Statements 1 and 2 are false.
The Correct Option is C
Solution and Explanation
Statement 1 is true: Expost savings and investments are equal because savings always equal investment in an economy when accounting for all income. The total savings will be used for investments.
Statement 2 is true: Under the effective demand principle, the equilibrium output is determined when exante Aggregate Demand (AD) equals actual output, i.e., the economy is at full employment.
Conclusion: Both statements are correct: Expost savings and investment are equal, and the equilibrium output is determined by exante Aggregate Demand.
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The level of income where Average Propensity to Save (APS) becomes zero is at Income = Rs. 100 crore, since savings (\( S = Y - C \)) equals zero at this point.
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Read the following statements carefully:
Statement 1: Ex-post savings and Ex-post investments are equal at all levels of income.
Statement 2: Under the effective demand principle, the equilibrium output is equal to ex-ante Aggregate Demand (AD). In the light of the given statements, choose the correct alternative from the following:Read the following statements carefully:
Statement 1: Ex-post savings and Ex-post investments are equal at all levels of income.
Statement 2: Under the effective demand principle, the equilibrium output is equal to ex-ante Aggregate Demand (AD). In the light of the given statements, choose the correct alternative from the following:
Top GATE XH-C1 Questions
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