CBSE Class 12 Economics Determination of Income and Employment MCQs Set 01

Question :  Which of the following indicates AD in an open economy?

a) Private (household) Consumption Expenditure

b) Household Investment Expenditure

c) Government expenditure + private consumption expenditure

d) Household consumption expenditure+ investment expenditure + government expenditure + net exports

Answer :  Household consumption expenditure+ investment expenditure + government expenditure + net exports

Question :  Consumption function is a functional relationship between:

a) Income and saving

b) Price and consumption

c) Income and consumption

d) Income, consumption and saving

Answer :  Income and consumption

Question :  Propensity to consume means:

a) Tendency of the consumer  towards higher consumption

b) Ratio of consumption to income

c) Level of income at which consumption expenditure is equal to income

d) Additional income to be spent on consumption

Answer :  Ratio of consumption to income

Question :  Average propensity to consume (APC) equal to :

a)

b)

c)

d)

Answer :

Question :  MPC being equal to 0.5, what will be , if income increases by Rs.100?

a) Rs. 60

b) Rs. 50

c) Rs. 40

d) Rs. 70

Answer :  Rs. 50

Question :  Propensity to save means:

a) Ratio of saving to income

b) level of income at which saving is equal to income

c) Additional income that is not to be saved

d) None of these

Answer :  Ratio of saving to income

Question :  If MPS is 0.6,what will be ∆S when income increases by Rs.100 ? 

a) Rs. 60

b) Rs. 50

c) Rs. 40

d) Rs.70

Answer :  Rs. 60

Question :  Average propensity (APS) is equal to:

a)

b)

c)

d)

Answer :

Question :  Which of the following is correct ?

a) MPC÷MPS=1         

b) 1-MPC=MPS

c) 1-MPS= MPC

d) All of these

Answer :  All of these

Question :  If MPC is 40 per cent, MPS will be

a) 70 percent

b) 60 percent

c) 50 percent

d) 40 percent

Answer :  60 percent

Question :  Since As= C+S and AD=C+I the equilibrium will be established where C+S= C+I, or where:

a) S=I     

b) S>I

c) S<I 

d) All the above

Answer :  S=I     

Question :  Equilibrium level of income/ output and employment is viewed from which of the following approaches ?

a) AS=AD approach

b) S=I approach

c) Both (a) and (b) 

d) None of these

Answer :  Both (a) and (b) 

Question :  On account of injections and withdrawals, equilibrium level of income undergoes :

a) A shift

b) No shift

c) A dispersal 

d) No change

Answer :  A shift

Question :  According to Keynes, equality (equilibrium) between AD and AS can take place in a situation

a) Less than full employment

b) Full employment

c) Beyond full employment  

d) All of these

Answer :  All of these

Question :  If MPC = 0.9, than value of multiplier will be:

a) 6        

b) 9

c) 10

d) 12

Answer :  10

Question :  Multiplier=

a) ∆Y/∆S

b) ∆Y/∆I

c) ∆I/∆Y

d) ∆Y/∆C

Answer :  ∆Y/∆I

Question :  Multiplier is estimated as:

a) 1/MPC

b) 1/1-MPC

c) 1/1+MPC    

d) 1/1+MPS

Answer :  1/1-MPC

Question :  If MPS =1/4, the value of multiplier will be :

a) 4

b) 2

c) 8

d) 6

Answer :  4

Question :  If MPC = 0, the multiplier will be:

a) 1

b) 0

c) 2

d) X

Answer :  1

Question :  If an investment of Rs. 10 crore results in an increase in income by Rs 50 crore, then the multiplier will be:

a) 5

b) 4

c) 2 

d) None of these

Answer :  5

Question :  Deficient demand leads to :

a) Deflationary Gap

b) Inflationary Gap

c) Both and (a) and (b)  

d) None of these

Answer :  Deflationary Gap

Question :  Deflationary gap is measured as :

a) AD_F + AD_U

b) AD_F÷ AD_U

c) AD_F - AD_U

d) None of these

Answer :  AD_F- AD_U

Question :  Which of the following does not lead to fall in AD ?

a) Fall in private consumption expenditure

b) Fall in export

c) Fall in Import

d) Fall in Government Expenditure

Answer :  Fall in Import

Question :  Deficient or excess demand can be corrected through

a) Fiscal Policy

b) Monetary Policy

c) Both (a) and (b)   

d) None of these

Answer :  Both (a) and (b)   

Question :  With a view to correcting deflationary gap or deficient demand, which of the following fiscal policy measures should be adopted ?

a) Reduction in taxes

b) Increase in public expenditure

c) Reduction in public debt

d) All of these

Answer :  All of these

Question :  Which of the following leads to increase in AD ?

a) Fall in imports

b) Increase in investment expenditure

c) Increase in government expenditure

d) All of these

Answer :  All of these

Question :  Of the following, what are the quantitative measures of monetary policy ?

a) Repo rate

b) Open market operations 

c) SLR

d) All of these

Answer :  All of these

Question :  A tax the burden of which can be shifted on to others, is called :

a) Indirect Tax

b) Direct Tax

c) Ad Valorem

d) Specific Tax

Answer :  Indirect Tax

Question :  The difference between fiscal and interest payment is called :

a) Revenue Deficit

b) Primary Deficit 

c) Bbudget Deficit

d) Capital Deficit

Answer :  Primary Deficit 

Question :  If the value exports exceeds the value of visible imports, the current account deficit will be:

a) Positive

b) Negative

c) Positive or Negative 

d) None of these

Answer :  Positive or Negative