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प्रश्न
Answer in detail.
Explain the equilibrium between Aggregate Demand and Aggregate Supply.
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उत्तर
The equilibrium level of income is determined at that point, where Aggregate Demand (AD) is equal to Aggregate Supply (AS). Here, AD refers to the planned/desired level of expenditure in the economy during an accounting year. Similarly, AS refers to the planned/desired level of output in an economy during an accounting year.
In the diagram, the consumption curve is depicted by C and the investment curve is depicted by the horizontal straight line parallel to the output/income axis. Summing up the investment curve and consumption curve, we get the aggregate demand curve represented by AD = C + I. The aggregate supply curve is represented by the 45° line. Throughout this line, the planned expenditure is equal to the planned output. That is, AS = Y = expenditure. The implication of the 45° line is that, in case of any disequilibrium, AS will be adjusted in a way to equate AD in order to restore equilibrium back. In other words, in case of any inequality between AD and AS, equilibrium output will be determined by AD.
The point E is the equilibrium point, where the planned level of expenditure (AD) is equal to the planned level of output (AS). In other words, this suggests that there is no undesired inventory accumulation. The equilibrium level of output is OQ, which is also known as the 'effective demand'.
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संबंधित प्रश्न
State the determinants of aggregate demand.
Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium
Explain the concept of ‘deficient demand’ in macroeconomics.
What is meant by aggregate demand?
State components of aggregate demand.
Explain how government spending can be helpful in removing deficient demand.
What is meant by inflationary gap?
State three measures to reduce inflationary gap.
Define aggregate supply?
Explain the role of Repo Rate in reducing the Inflationary gap.
Explain the concept of deflationary gap.
explain the role of Bank Rate in correcting deficient demand?
What is a ‘consumption function’?
Explain the subjective factors which determine consumption function.
What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?
Fill in the blank with appropriate alternatives given below
That part of income, which is not spent on consumption, is called __________.
Match the following Group:
| Group A | Group B | ||
| 1) | Aggregate Supply | a) | Expected receipts |
| 2) | Autonomous Investment | b) | Lord J. M. Keynes |
| 3) | Consumption | c) | Government Investment |
| 4) | A.P.C. | d) | ΔC/ΔY |
| 5) | Investment | e) | C/Y |
| f) | Addition to stock of capital | ||
| g) | Destruction of utility | ||
Define or Explain the following concept:
Aggregate Demand
Distinguish between:
Aggregate Demand and Aggregate Supply
Write Short note on:
Marginal Propensity to Consume
Answer the following question:
What are the determinants of Aggregate Demand (AD)?
Answer the following question:
What are the determinants of Aggregate Supply (AS)?
State with reason whether you agree or disagree with the following statement.
Aggregate supply is influenced by the state of technology only.
State with reason whether you agree or disagree with the following statement.
Positive net earnings from foreign transactions add to aggregate demand.
Write explanatory answer.
What is 'aggregate supply'? Explain the determinants of aggregate supply.
Explain the concept of deficient demand with the help of aggregate demand and aggregate supply curves. Discuss one physical and one monetary measure to correct it.
Discuss the working of the adjustment mechanism in the following situations:
Aggregate demand is greater than the aggregate supply.
Answer the following question.
Describe the adjustments that may take place in an economy when ex-ante Aggregate Demand is greater than ex-ante Aggregate Supply.
What is meant by the “Effective Demand Principle” in the Keynesian theory of employment? Discuss using a schedule or a diagram.
On which factor Keynesian Theory of Employment depends?
The main component of aggregate demand is ______
On which concept does classical viewpoint depend?
Keynes theory is associated with ______
What is meant by Equilibrium income?
How is it determined by using Saving and Investment approach?
Identify the correctly matched pair from Column A to Column B:
| Column A | Column B |
| (1) Y = AD | (a) Level of output at full employment |
| (2) Forward Multiplier | (b) Withdrawal of investment decreases income |
| (3) Paradox of Thrift | (c) People save less or same as before |
| (4) Multiplier (k) < 1 | (d) 0 < MPC < 1 |
Which of the following are the definitions of money supply in India?
When the value of the currency falls as compared to other currencies, it is ______
Which of the following statement is true?
What is the circumstance when aggregate output is determined solely by the level of aggregate demand called?
The equilibrium level of income/output is established when ______
When aggregate demand is greater than aggregate supply, inventories:
“In an economy ex-ante Aggregate Demand is less than ex-ante Aggregate Supply.”
Explain its impact on the level of output, income and employment.
If planned savings exceeds planned investments in an economy, explain its likely impact on income, output and employment.
Why is effective demand also known as expost demand?
With reference to Simple Keynesian model, give the meaning of ex-ante demand.
If aggregate demand exceeds aggregate supply in a situation of full employment, what will be its impact on the economy?
With the help of a diagram, determine the equilibrium level of output and income by using Aggregate demand and aggregate supply approach.
