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Income Determination & the Multiplier · Question 3 of 58

The graph shows the AD line and the 45° line.

Question 3

MediumOriginal question

The graph shows the AD line and the 45° line. What is equilibrium income?

An aggregate demand line AD = C + I that starts at ₹100 crore on the vertical axis, and a dashed 45° line. They meet at E, where income and aggregate demand are both ₹400 crore.
Options for question 3

Show the answer and explanation
CorrectNot quiteAnswer C

Correct answer: C

Explanation

  1. Equilibrium is where AD crosses the 45° line, at E.

  2. E is at an income of ₹400 crore.

Worth noting

₹100 crore is autonomous spending (c̄ + I), where AD starts.

Concept
Reading equilibrium off the cross
Typical time
70 s
Your time
—
The rule this testsEquilibrium: AD equals output
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Ten questions from Income Determination & the Multiplier, at your own pace.

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Ten questions from Income Determination & the Multiplier, at your own pace.

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