The graph shows AD₂ below AD. If AD₂ is raised by ₹60 crore at every income, equilibrium income rises by A dashed 45° line, an AD line that meets it at F at the full-employment income of ₹400 crore, and a lower line AD₂. At ₹400 crore of income, AD₂ is ₹340 crore (point D), ₹60 crore below F. AD₂ meets the 45° line at E₂, at an income of ₹280 crore.

The graph shows AD₂ below AD. — CUET Economics practice

The graph shows AD₂ below AD.

HardOriginal question

The graph shows AD₂ below AD. If AD₂ is raised by ₹60 crore at every income, equilibrium income rises by

₹60 croreCorrect answerYour answer₹120 croreCorrect answerYour answer₹340 croreCorrect answerYour answer₹400 croreCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

Raising AD₂ by 60 makes it AD, which meets the 45° line at F (₹400 crore).
Income rises from E₂ (280) to F (400), by ₹120 crore: the multiplier, 2 here, at work.

Ten questions from Excess & Deficient Demand, at your own pace.

Ten questions from Excess & Deficient Demand, at your own pace.