CBSE 2025, Compartment, Set 1

Question

In the Keynesian economic analysis, determination of equilibrium income in the short-run is usually expressed as
(Choose the correct alternative to fill in the blank)
(i) Ex-ante Aggregate Demand = Ex-ante Aggregate Supply
(ii) Consumption (C) + Investment (I) = Savings
(iii) Consumption (C) + Investment (I) = National Income
(iv) Ex-ante Savings = Ex-ante Investments A). (i) and (ii) B). (i) and (iv) C). (i), (ii) and (iv) D). (i), (iii) and (iv)

Edvaya · Accepted Answer

The correct answer is (i), (iii) and (iv). In Keynesian analysis, short-run equilibrium is established when: 1. Planned Aggregate Demand equals Planned Aggregate Supply (Ex-ante AD = Ex-ante AS). 2. Since AS is equal to National Income ($Y$), equilibrium can be expressed as $Y = C + I$ (National Income = Consumption + Investment). 3. Planned Savings equals Planned Investment (Ex-ante S = Ex-ante I). Equation (ii) is incorrect because $C + I$ does not equal Savings.

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Economics > Introductory Macroeconomics > Determination Of Income Employment

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