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Question
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 | ||
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Solution
| Group A | Group B | ||
| 1) | Aggregate Supply | a) | Expected receipts |
| 2) | Autonomous Investment | c) | Government Investment |
| 3) | Consumption | b) | Lord J. M. Keynes |
| 4) | A.P.C. | e) | C/Y |
| 5) | Investment | f) | Addition to stock of capital |
Explanations:
1) Aggregate supply is defined as the minimum amount of sales receipts which an entrepreneur expects to receive from his sales proceedings to continue production at a given point of employment.
2) Autonomous investment is that investment which is independent of profit as a motive i.e. which is made without an aim of maximising the returns. Government investments on transportation, communication, defence which are aimed at public welfare are some examples of such an investment.
3) J.M.Keynes was the first economist who propounded the ‘Psychological Law of Consumption’, in which he explained the relationship between consumption and income.
4) Average propensity to consume is the consumption per unit income. It shows the ratio of consumption expenditure to the level of income. Algebraically,
`APC = C/Y`
5) Investment is defined as the addition made to the physical stock of the capital of a country. The physical stock of the capital may include land, building, machinery, tools, inventories etc.
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