NCERT Solutions Class 12 Economics National Income Determination and Multiplier

NCERT Solutions Class 12 Economics National Income Determination and Multiplier with answers available in Pdf for free download. The NCERT Solutions for Class 12 Economics with answers have been prepared as per the latest syllabus, NCERT books and examination pattern suggested in Standard 12 by CBSE, NCERT and KVS. Solutions to questions given in NCERT book for Class 12 Economics are an important part of exams for Grade 12 Economics and if practiced properly can help you to get higher marks. Refer to more Chapter-wise Solutions for NCERT Class 12 Economics and also download more latest study material for all subjects

National Income Determination and Multiplier Class 12 NCERT Solutions

Class 12 Economics students should refer to the following NCERT questions with answers for National Income Determination and Multiplier in standard 12. These NCERT Solutions with answers for Grade 12 Economics will come in exams and help you to score good marks

National Income Determination and Multiplier NCERT Solutions Class 12

NCERT Solutions Class 12 Economics National Income Determination and Multiplier. NCERT book for Economics in class 12 is strongly recommened by teachers and the CBSE and NCERT boards. Please download the NCERT solutions for class 12 Economics free in PDF made by teachers of the best schools in India. These solutions are carefully compiled to give detailed understanding of the concepts and also steps of solutions. The NCERT solutions are free to download in pdf format. Please refer to the download link below to download the pdf file and also refer to other chapters and subjects to get the solutions to Economics NCERT book questions and exercises.

National Income Determination and Multiplier

Question 1. Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs 50 crores, and MPS is 0.2 and level of income (Y) is Rs 4000 crores. State whether the economy is in equilibrium or not (cite reasons).
Answer: As given in the examination problem, Equilibrium Income (Y) = Rs 4000 crore Autonomous Investment + Autonomous Consumption  = Rs 50 crore MPS = 0.2
So, MPC(b) = 1 – 0.2 = 0.8
(MPC = 1 – MPS)
AD = C + I
AD =  + bY + I =  + bY
= 50 + 0.8Y 
As we know, the equilibrium level of national income in two-sector model is determined where,
AS = AD
Y = 50 + 0.8Y
4000 = 50 + 0.8(4000)
4000 = 50 + 3200
4000 =3250
Hence, the economy is not in equilibrium.

Question 2. Explain ‘Paradox of Thrift’. [3-4 Marks]

Answer:

1. The term thrift means savings and the paradox of thrift shows how an attempt by the economy as a whole to save more out of its current income will ultimately result in lower savings for the economy.

2. If all the people in the economy make an effort to save more, then the total savings of the community will not increase, on the contrary they will decrease. This is called the paradox of thrift.

3. Reasons for “Paradox of thrift” to operate:

(a) As we know that one person’s expenditure is another person’s income.

(b) If individual ‘A’ decides to save more by reducing his consumption expenditure, the income of individual ‘B’ will be less and individual ‘B’ in turn will spend less.

(c) Thus, if all individuals in the economy decide to save more, the income received byeach individual will be less and overall income will fall and also lower will be the total savings.

Please click on link below to download NCERT Solutions Class 12 Economics National Income Determination and Multiplier.

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