4.3.1 - Macroeconomic Equilibrium with Price Level Fixed
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Practice Questions
Test your understanding with targeted questions
What is the definition of macroeconomic equilibrium?
💡 Hint: Think about the balance in economic terms.
Explain the term 'marginal propensity to consume'.
💡 Hint: It's about what you do with extra money.
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Interactive Quizzes
Quick quizzes to reinforce your learning
What does the term 'aggregate demand' refer to?
💡 Hint: Think about what drives economic activity.
True or False: The equilibrium income changes when the price level is fixed.
💡 Hint: Consider the factor that remains constant.
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Challenge Problems
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If the economy's autonomous consumption is Rs. 150, investment is fixed at Rs. 200, and the marginal propensity to consume is 0.6, derive the equilibrium income using the relevant formula.
💡 Hint: Remember to add consumption and investment values first before applying the formula.
Discuss the implications of a sudden rise in consumer confidence that leads to a 25% increase in autonomous consumption. Calculate the new equilibrium income if the marginal propensity to consume remains at 0.9.
💡 Hint: Consider how increased spending can amplify overall economic output using the multiplier effect.
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