CBSE Class 12 Economics — Determination of Income and Employment

In an economy, when __________ is insufficient to achieve the level of output corresponding to the full employment, the difference is termed a deflationary gap. (Choose the correct option to fill in the blank)

Identify, which of the following is true at the Break Even level of Income. (Choose the correct option)

(A) "Income of an economy increased from ` 20,000 to ` 50,000 crore. Savings of the economy increased from ` 2,000 crore to ` 10,000 crore." (i) Calculate Average Propensity to Consume (APC) and Average Propensity to Save (APS), before and after the rise in income. (4) (ii) Draw appropriate conclusion regarding the behaviour of Average Propensity to Consume (APC) as his income increases. (2) OR (B) "Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities. As the income of people increased, their consumption also increased, but not as rapidly as income." Based on the given text and common understanding, answer the following questions : (i) Identify and elaborate the type of consumption indicated in the first para of the above text. (3) (ii) Explain, the reason behind the positive slope of Aggregate Demand Curve. (3)