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WorksheetsTHEORY OF INCOME DETERMINATION
Total questions: 46
Worksheet time: 37mins
Autonomous Consumption is __________________ related to the level of Income.
Totally
Inversely
Positively
Not
What is the Value of MPS if MPC is given as 0.85
0.25
0.35
0.15
0.85
Slope of Consumption Function is called:
Autonomous Consumption
MPC
APC
APS
The Maximum value of MPC can be:-
0.5
Infinity
1
0
Autonomous Investment curve looks like:-
Consumption Function is the Functional Relation between
Income and saving
Price level and consumption
Income and consumption
ALL OF THE ABOVE
When Income is Zero, Then saving will be
0
-ve
+ve
None of these
Whose value can be greater than I ?
APC
MPC
MPS
NONE OF THESE
Aggregate supply is equal to
National Income
Consumption + Savings
Both A and B
Aggregate Demand
Theory of Determination of income and Employment is based on
Ex-ante
Ex-Post
Both A and B
None of the above
AD=
C+I
C x I
C + S
C/Y
Investment That changes with the change in income is called
Autonomous Investment
Induced Investment
Net Investment
Gross Investment
AS curve Starts from
The origin point
below the origin point
above the origin point
none of these
Theory of Determination of income and Employment is based on
Ex-ante
Ex-Post
Both A and B
None of the above
AS curve Starts from
The origin point
below the origin point
above the origin point
none of these
Equilibrium level of income can be determined at:
full employment
under full employment
over full employment
all of these
Who is the author of the book The general Theory of Employment and Money
Ricardo
J.M Keynes
J.B Ray
Adam Smith
Which of the following is the correct definition of "Full Employment"?
A) All workers are employed at all times
B) Only skilled workers are employed
C) Every person who wants to work can find employment at the prevailing wage rate
D) Unemployment is zero at all times
Involuntary unemployment occurs when:
A) Workers voluntarily leave their jobs for personal reasons
B) Workers are unable to find work despite being willing and able to work at the prevailing wage rate
C) Workers are employed in part-time jobs by choice
D) People retire before the legal retirement age
Read the following statements Assertion (A) and Reason (R) and choose one of the correct alternatives given below:
Assertion: At higher level of income, people generally have lower marginal propensity to consume.
Reason: Keynes psychological law suggest that “consumption increases as income increases but at lower rate.
A) Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation of Assertion (A).
B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
C) Assertion (A) is true, but Reason (R) is false.
D) Assertion (A) is false, but Reason (R) is true.
Read the Following statement carefully.
Statement 1: There is a direct relationship between MPC and the value of Multiplier.
Statement 2: Multiplier Higher the MPC, more will be the value of multiplier and vice-versa.
A) Statement one is true and two 2 is false
B) Both the statement are true
C) Statement two is true and one is false
D) None of the statement are true
Identify which one is the example/examples of Investment?
A) Purchase of machinery
B) Purchase of car
C) Purchase of building
D) all of the given
The GAP by which the Aggregate Demand has exceeded the the AD that is required for Full Employment Equilibrium, It is called as :-
Inflationary GAP
Deflationary GAP
Underemployment GAP
None of these
Autonomous Consumption is __________________ related to the level of Income.
Totally
Inversely
Positively
Not
When Income is Zero, Then saving will be
0
-ve
+ve
None of these
Assertion (A) saving cow makes a negative intercept on the vertical access at the zero level of income.
Reason (R) saving function refers to the functional relation between saving and income.
Both Assertion (A) and Reason (R) are true and reason (R) is the correct explanation of Assertion (A)
Bothe assertion (A) and reason (R) are true, but reason (r);is not the correct explanation of Assertion (A)
Assertion (A) is true, but reason (R) is false
Assertion (A) is false, but reason(R) are true
,......... Refers to the level of aggregate demand which can be made by the corresponding supply in the economy
autonomous consumption
effective demand
Excess Damand
Deficient demand
Assertion (A) at the break - even level of income, the value of average propensity to consume (APC) is Zero
Reason (R) sum of average propensity to consume (APC) and average propensary to save (APS) is always equal to the one.
Both assertion (A) and reason (R) true and reason (R) is the correct explanation of assertion (A)
Both assertion (A) and reason (R) are true but reason (R) is not the correct explanation of Assertion (A)
Assertion (A) is true, but Reason (R) is false
Assertion (A) is false , but Reason (R) is true
Statement 1: The induced consumption shows the director relation between consumption and income.
Statement 2: with a certain increase in income, induced consumption also increases
Statement 1 is true and statement 2 is false
Statement 1 is false and statement 2 is true
Both statement are true
Both statement are false
If increase in national income is equal to increase in savings, the value of marginal propensity to conceive would be ...........
Equal to unity
Greater than one
Less than one
Equal to zero
Statement 1 in a 2 sector economy consumption expenditure and investment expenditure are the two components of aggregate demand.
Statement 2 aggregate demand curve always start from point of origin with a positive slope.
Statement 1 is true and the statement 2 is false
Statement 1 is false and the statement 2 is true
Both statement are true
Both statements are false
Graphically aggregate demand function can be obtained by vertically adding the ......... And ......... Function.
Consumption, saving
Consumption, investment
Investment, saving
Aggregate supply, consumption
At equilibrium level:
consumption = investment
saving = investment
aggregate demand = saving
consumption = saving
Investment That changes with the change in income is called
Autonomous Investment
Induced Investment
Net Investment
Gross Investment
What is the relationship between saving and investment at equilibrium?
Investment is always less than saving
Saving equals consumption
Saving is always greater than investment
Investment equals saving
What does the 45° line in the income-output diagram represent?
Total government expenditure equals total income
Total consumption equals total demand
Total savings equals total investment
Total output equals total income
Which policy is used to control inflation?
Foreign policy
Trade policy
Monetary policy
Environmental policy
What is the effect of deficiency in demand?
Increase in investment
Increase in employment
Surplus of goods in the market
Increase in prices
What happens in a situation of excess demand?
Aggregate demand is less than potential output
Aggregate demand exceeds potential output
There is a surplus of goods in the market
Prices of goods and services fall
What is the formula for aggregate demand (AD)?
AD = C + I + G + NX
AD = C + S + I
AD = C + I + S
AD = C + G + NX
What does the equilibrium level of income represent?
The total investment made by households
The point where aggregate demand equals total output
The maximum potential output of the economy
The total savings in the economy
Which of the following is NOT a component of aggregate demand?
Corporate savings
Government expenditure
Investment by firms
Household consumption demand
What is aggregate demand defined as?
Total investment made by firms
Total supply of goods and services
Total demand for goods and services at a given price level
Total income generated in the economy
What does the term 'effective demand' refer to?
The total income generated in the economy
The point where aggregate demand equals output
The level of output in the economy
The total demand for goods and services
What is the result of an increase in investment in the economy?
Decrease in aggregate demand
Increase in equilibrium income
Decrease in consumption
Increase in imports
What is the primary goal of fiscal policy?
Control the money supply
Regulate interest rates
Control foreign trade
Manage taxation and public expenditure
