CA Foundation P4 · Chapter 5 · Question 10 of 15
In a three-sector economy (Rs. crore): C = 50 + 0.8Yd, where Yd = Y - T; lump-sum tax T = 100; investment I = 100; government expenditure G = 150. Equilibrium income is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 1,100 crore
Explanation
Y = C + I + G = 50 + 0.8(Y - 100) + 100 + 150 = 50 - 80 + 250 + 0.8Y = 220 + 0.8Y. So 0.2Y = 220 and Y = Rs. 1,100 crore. Check: Yd = 1,000, C = 50 + 800 = 850; 850 + 100 + 150 = 1,100. Ignoring the tax gives (50 + 250)/0.2 = 1,500.
More Determination of National Income MCQs
- Q12In an open economy, MPC = 0.8 and the marginal propensity to import = 0.05 (with no taxes). The open-economy multiplier is:
- Q13In the two-sector Keynesian model, equilibrium income is attained where:
- Q14An inflationary gap exists when:
- Q15Disposable personal income is equal to:
- Q1Gross National Product (GNP) is equal to: