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Excess & Deficient Demand · Question 21 of 53

Question 21

HardOriginal question

C = 40 + 0.75Y, planned investment is ₹80 crore and full-employment income is ₹400 crore. The inflationary gap is

Options for question 21

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. AD at an income of 400 = 40 + 0.75 × 400 + 80 = 420.

  2. Gap = AD − full-employment output = 420 − 400 = ₹20 crore.

Concept
Calculating the inflationary gap
Typical time
100 s
Your time
—
The rule this testsExcess demand and the inflationary gap
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