CBSE Class 12 Economics Determination of Income and Employment Assignment Set 03

Determination of Income and Employment

Question. What is the shape of the Keynesian Aggregate Supply before the level of full employment is attained?
(a) Perfectly inelastic
(b) Perfectly elastic
(c) Unitary elastic
(d) More elastic
Answer: (B)

Question. According to classical economists, real wage rate is ______ to the Marginal Productivity of Labour.
(a) Equal
(b) More
(c) Less
(d) None of these
Answer: (A)

Question. What is the cause of Keynesian perfectly elastic Aggregate Supply curve?
(a) Wage price rigidity
(b) Constant Marginal Product of Labour
(c) Both of these
(d) None of these
Answer: (C)

Question. According to classical economists, there always exists ______ equilibrium in the economy.
(a) Full employment
(b) Underemployment
(c) Over full employment
(d) None of these
Answer: (A)

Question. What will be APC when APS = 0?
(a) One
(b) Zero
(c) Two
(d) Infinite
Answer: (A)

Question. Which is the measure of correcting excess demand?
(a) Deficit financing
(b) Reduction in taxes
(c) Increase in public expenditure
(d) Increase in public debt
Answer: (D)

Question. On the basis of government law, the compulsory payment made by the public is known as _________
(a) Expenditure
(b) Investment
(c) Tax
(d) Subsidy
Answer: (C)

Question. Which among is the direct tax?
(a) Income tax
(b) Gift and Corporation tax
(c) Wealth tax
(d) All of these
Answer: (D)

Question. The value of multiplier is:
(a) \( \frac{1}{MPC} \)
(b) \( \frac{1}{MPS} \)
(c) \( \frac{1}{1-MPS} \)
(d) \( \frac{1}{MPC-1} \)
Answer: (B)

Question. If MPC = 1, the value of the multiplier is:
(a) 0
(b) 1
(c) Between 0 and 1
(d) Infinity
Answer: (D)

Question. Aggregate demand can be increased by:
(a) increasing bank rate
(b) selling govt, securities by RBI
(c) increasing cash reserve ratio
(d) none of these
Answer: (D)

Question. If the marginal propensity to consume is greater than the marginal propensity to save, the value of the multiplier will be
(a) greater than 2
(b) less than 2
(c) equal to 2
(d) equal to 5
Answer: (A)

Question. Supply creates its own Demand. Who gave this law?
(a) J.B.Say
(b) J.S.Mill
(c) Keynes
(d) Ricardo
Answer: (a)

Question. Who is the author of the book ‘General Theory of Employment, Interest, and Money’?
(a) A.C. Pigou
(b) Malthus
(c) J.M. Keynes
(d) Marshall
Answer: (c)

Question. Which of the following is true for the Classical Theory of Employment?
(a) State of full employment in the economy
(b) No possibility of over-or under-production in the economy
(c) Both (a) and (b)
(d) None of the above
Answer: (c)

Question. On which factor Keynesian Theory of Employment depends?
(a) Effective Demand
(b) Supply
(c) Production Efficiency
(d) None of the above
Answer: (a)

Question. Which is the determining factor for investment?
(a) Marginal Efficiency of Capital
(b) Interest Rate
(c) Both (a) and (b)
(d) None of these
Answer: (c)

Question. According to Keynes, investment implies:
(a) Financial Investment
(b) Real Investment
(c) Both (a) and (b)
(d) None of the above
Answer: (b)

Question. With the increase in investment, MEC:
(a) Rises
(b) Falls
(c) Remains Constant
(d) None of these
Answer: (b)

Question. Which of the following is a Read Investment?
(a) Purchasing of a Share
(b) Purchasing of Old Factory
(c) Construction of Buildings
(d) Opening Deposit Account in the Bank
Answer: (c)

Question. APC + APS = ?
(a) ?
(b) 2
(c) 1
(d) 0
Answer: (b)

Question. MPC = MPS = ?
(a) ?
(b) 2
(c) 1
(d) 0
Answer: (c)

Question. Which or is true?
(a) MPC + MPS = 0
(b) MPC + MPS < 1
(c) MPC + MPS = 1
(d) MPC + MPS > 1
Answer: (c)

Question. The main component of aggregate demand is:
(a) Individual consumption
(b) Public consumption
(c) Investment
(d) All the above
Answer: (d)

Question. Who is the writer of the book, “Trained Economic Politique”?
(a) Pigour
(b) J.B. Say
(c) Keynes
(d) Ricardo
Answer: (a)

Question. IF MPC = 0.5, then Multiplier (k) will be:
(a) 1/4
(b) = 0
(c) 1
(d) 2
Answer: (d)

Question. On which concept does classical viewpoint depend?
(a) Say’s Law of Market
(b) perfect Flexibility of Wage Rate
(c) Perfect Flexibility of Interest Rate
(d) All of these
Answer: (d)

Question. “Wage cut maintains full employment in the economy.” Who put forward this view?
(a) Pigou
(b) Keynes
(c) Marshall
(d) None of the above
Answer: (a)

Question. Which one of the following is the determining factor of Equilibrium Income is the Keynesian Viewpoint?
(a) Aggregate Demand
(b) Aggregate Supply
(c) Both (a) and (b)
(d) None of the above
Answer: (c)

Question. In Keynesian viewpoint, the equilibrium level of income and employment in the economy will be established where:
(a) AD > AS
(b) AS > AD
(c) AD = AS
(d) None of these
Answer: (c)

Question. According to the saving-investment viewpoint, income employment equilibrium will be determined at a point where:
(a) S > I
(b) I > S
(c) S = I
(d) None of these
Answer: (c)

Question. An increase in aggregate demand of equilibrium level of income and employment causes an increase in:
(a) Employment
(b) Production
(c) Income
(d) All of these
Answer: (d)

Question. Which one is correct?
(a) Y = C + I
(b) Y = O = N
(c) C + S = C + I
(d) All of these
Answer: (d)

Question. Keynes theory is associated with :
(a) Effective demand
(b) Propensity to consume
(c) Propensity to save
(d) All of these
Answer: (d)

Question. Keynesian multiplier establishes a relationship between:
(a) Investment and Income
(b) Income and Consumption
(c) Saving and Investment
(d) None of the above
Answer: (a)

Question. Which one is correct?
(a) K = 1MPC
(b) K = 1MPS
(c) K = 11−MPS
(d) K = 11+MPS
Answer: (b)

Question. Multiplier can be expressed as:
(a) \( K = \frac{\Delta S}{\Delta I} \)
(b) \( K = \frac{\Delta Y}{\Delta I} \)
(c) \( K = I – S \)
(d) None of these
Answer: (b)

Question. Keynes derived Investment Multiplier from Kahn’s :
(a) Income Multiplier
(b) Consumption Multiplier
(c) Employment Multiplier
(d) None of the above
Answer: (c)

Question. The value of Keynesian Investment Multiplier depends on:
(a) Income Level
(b) Marginal Productivity of Capital
(c) Marginal Propensity to Consume
(d) Investment Level
Answer: (c)

Question. Which factor affects Keynesian Multiplier?
(a) Marginal Propensity to Save
(b) Marginal Propensity to Consume
(c) Both (a) and (b)
(d) None of the above
Answer: (c)

Question. Which of the following is correct?
(a) MPC and multiplier have a direct relationship
(b) MPS and multiplier have an inverse relationship
(c) Both (a) and (b)
(d) None of the above
Answer: (c)

Question. The value of MPC is:
(a) 1
(b) 0
(c) Greater than 0 but less than 1
(d) ?
Answer: (c)

Question. If MPC = 0.5, then multiplier (K) will be:
(a) 1/2
(b) 1
(c) 2
(d) 0
Answer: (c)

Question. If MPC = 0.5 and initial investment is 100 Rs crores, the income generation in the economy will be :
(a) 5 crores Rs
(b) 100 crores Rs
(c) 200 crores Rs
(d) 500 crores Rs
Answer: (c)

Question. ‘The theory of employment multiplier was propounded by:
(a) Keynes
(b) Kahn
(c) Hansen
(d) Marshall
Answer: (b)

Question. If income equilibrium level in the economy is determined at the level before full employment, it is known as the state of:
(a) Deficit Demand
(b) Surplus Demand
(c) Partial Demand
(d) None of these
Answer: (a)

Question. In Keynesian economics, the state of Deficit Demand is called as:
(a) Full Employment Equilibrium
(b) Under Full Employment Equilibrium
(c) Both (a) and (b)
(d) None of the above
Answer: (b)

Question. What are the characteristics of Deficit Demand?
(a) Aggregate Demand falls short of Aggregate Demand required at full employment
(b) Aggregate Demand remains short of Aggregate Supply required of full employment level
(c) Both (a) and (b)
(d) None of above
Answer: (c)

Question. Deflationary Gap shows the measurement of:
(a) Deficit Demand
(b) Surplus Demand
(c) Full Employment
(d) None of these
Answer: (a)

Question. Which one is the reason for appearing Deficit Demand condition?
(a) Fall in the money supply in the country
(b) Fall in investment demand as a result of rising in bank rate
(c) Fall in disposable income and consumer demand due to increase in taxes
(d) All the above
Answer: (d)

Question. Which of the following is true?
(a) Employment level declines due to decrease in demand
(b) Price level falls due to deficient demand in the country
(c) Production level falls deficient demand
(d) All the above
Answer: (d)

Question. The ‘difference between the Aggregate Demand at above full employment and Aggregate Demand at full employment is known as:
(a) Inflationary Gap
(b) Deflationary Gap
(c) Both (a) and (b)
(d) None of the above
Answer: (a)

Question. Which of the following is a reason for surplus demand?
(a) Increase in Public Expenditure
(b) Increase in Money Supply
(c) Fall in Taxes
(d) All the above
Answer: (d)

Question. In the situation of the deflationary gap:
(a) Demand increases rapidly
(b) Supply increase rapidly
(c) Both demand and supply are equal
(d) All of these
Answer: (d)

Question. Which of the following causes the trade cycle?
(a) Deflationary Conditions
(b) Inflationary Conditions
(c) Both (a) and (b)
(d) None of these
Answer: (c)

Question. Which one is the corrective measure for Deficient Demand?
(a) Fiscal Measures
(b) Monetary Measures
(c) Both (a) & (b)
(d) None of the above
Answer: (c)

Question. Which measure is included in Fiscal Measures?
(a) Public Expenditure
(b) Taxation
(c) Public Debt
(d) All of these
Answer: (d)

Question. Which fiscal measure should be adopted for correcting Deficient Demand?
(a) Government should spend more on public works
(b) Taxation should be reduced
(c) Pubic debt should be reduced
(d) All the above
Answer: (d)

Question. With which component of Monetary Policy, Central Bank tries to attain economic stability in the country?
(a) Supply of Money
(b) Interest Rate
(c) Availability of Money
(d) All of these
Answer: (d)

Question. Which method Central Bank adopts for controlling quantitative credit?
(a) Bank Rate
(b) Open Market Operations
(c) Change in Cash Reserve Ratio
(d) All the above
Answer: (d)

Question. Which is a qualitative method of controlling credit?
(a) Change in Margin Requirements of Loanee
(b) Credit Rationing
(c) Direct Action
(d) All of these
Answer: (d)

Question. Which monetary measure may be adopted to correct Deficient Demand?
(a) Reduction in Bank Rate
(b) Buying Securities in Open Markey
(c) Reducing Cash Reserve Ratio
(d) All the above
Answer: (d)

Question. Which fiscal measure is to be adopted in correcting the Inflationary Gap?
(a) Reduction in Public Expenditure
(b) Increase in taxes
(c) Increase in Public debt
(d) All of these
Answer: (d)

Question. Which monetary measure is to be adopted in correcting Inflationary
(a) Increase in Bank Rate
(b) Selling of Securities in Open Market
(c) Increase in Cash Reserve Ratio
(d) All the above
Answer: (d)

Question. Income and employment are determined by:
(a) Total demand
(b) Total supply
(c) Total demand and total supply both
(d) By market demand
Answer: (c)

Question. The relation between consumption and savings are:
(a) Inverse
(b) Direct
(c) Inverse and direct both
(d) Neither inverse nor direct.
Answer: (a)

Question. When an economy they’re to save all its extra income then investment calculation will be:
(a) 1
(b) Uncertain
(c) 0
(d) Infinite
Answer: (a)

Question. “Supply creates its own demand”. This statement was given by the economist:
(a) Keynes
(b) Pigou
(c) J. B.Say
(d) Adam Smith
Answer: (c)

Question. The classical theory is based on the assumption of:
(a) Say’s the law of market
(b) Flexibility in wage rates
(c) Flexibility in interest rate
(d) All of the above
Answer: (d)