The correct option is
1 only
Explanation
In the Keynesian macroeconomic model, Aggregate Demand (AD) is a function of autonomous expenditure (including autonomous investment) and induced consumption based on income. The equilibrium level of income is determined where Aggregate Demand equals Aggregate Supply ($AD = AS$).
Statement-wise Analysis:
- Statement 1 is Correct: The Aggregate Demand function is often expressed as $AD = \bar{A} + cY$, where $\bar{A}$ represents autonomous expenditure (including autonomous investment) and $c$ is the Marginal Propensity to Consume (MPC). An increase in autonomous investment increases the vertical intercept ($\bar{A}$) without changing the slope ($c$). Consequently, the AD curve shifts upwards parallel to the original curve.
- Statement 2 is Incorrect: According to the theory of the investment multiplier, a change in autonomous investment leads to a more than proportionate change in the equilibrium level of income. The change in income ($\Delta Y$) is calculated as $\Delta Y = k \cdot \Delta I$, where the multiplier $k = \frac{1}{1 - MPC}$. Since $0 < MPC < 1$, the multiplier $k$ is greater than 1. Therefore, income increases by an amount greater than the increase in investment, not equal to it.
- Statement 3 is Incorrect: An autonomous increase in investment boosts Aggregate Demand, which leads to an increase in the equilibrium level of income. While the "crowding out" effect (where rising interest rates dampen private investment) is a valid concept in the IS-LM framework, it typically mitigates the extent of the increase but does not cause the equilibrium income to fall below the initial level. The net effect of increased investment is an expansion of income.
Key Takeaway:
An increase in autonomous investment causes a parallel upward shift in the Aggregate Demand curve. Due to the multiplier effect, the resulting increase in equilibrium national income is larger than the initial injection of investment.