Class Test

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 1. If income rises from ₹80,000 to 1,00,000, consumption increases from ₹50,000 to ₹60,000. In this situation, what will be the value of Marginal Propensity to Consume (MPC)? (Choose the correct alternative.)

(A) 0.40

(C) 0.30

(B) 0.50

(D) 0.20                                                          [1]

2. Which of the following is not the reason for Excess Demand?

(A) Increase in public expenditure   (B) Increase in taxes      
 (C) Deficit financing     (D) Extension of credit facilities               [1]

3. Which of the following is not a measure to correct excess demand?

(A) Rise in Bank Rates       (B) Rise in CRR.

(C) Increase in taxes      (D) Decrease in Repo rate.

4. Identify the correctly matched pair from Column A to that of Column B:
Column A                              Column B
(1) Ex-Ante Savings          (a) It is realised saving.

(2) Ex-Ante Investment     (b) It is the planned or de- sired or intended saving during a particular p period.
(3) Ex-Post Savings        (c) It is the planned or de- sired or intended invest- ment during a particular period.
(4) Ex-Post Investment   (d) It is realised investment.
(A) (1)-(a)                 (B) (2)-(b) 
(C) (3)-(c)                (D) (4) - (d)
Read the following statements - Assertion (A) and Reason (R) in the Questions 5 and 6 and choose the answer from the given alternatives choose the correct one:
Alternatives:
(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 and 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

5. Assertion (A): To increase the employment level in the economy, the Aggregate Demand is increased. 
Reason (R): Aggregate Supply depends on technological factors.       [1]

6. Assertion (A): Higher the MPC, higher is the Income in the economy.

Reason (R): MPC depends on the change in income and change of consumption.   [1]

7. Identify the correctly matched pair from Column A to that of Column B:
Column A            Column B
(1) MPC           (a) Ratio of Savings to Consumption

(2) APC            (b) Ratio of Consumption to Income

(3) APS            (c) Ratio of Consumption to Savings
(4) MPS            (d) Ratio of Savings to Investment
(A) (1)-(a)                 (B) (2)-(b) 
(C) (3)-(c)                (D) (4) - (d)
8. Consumption depends on:
(A) Income                          (B) Savings
(C) Aggregate Demand    (D) Both (A) and (B)

9. Which of the following statements is correct? [1] 
(A) Autonomous investment refers to investment which is dependent on the level of income in the economy.

(B) Autonomous investment refers to investment which is dependent on the level of consumption in the economy.

(C) Autonomous investment refers to investment which is independent of the level of income in the economy.

(D) Autonomous investment refers to investment which is dependent of the level of consumption in the economy.

10. Which of the following statements is true? 
(A) When MPS 1, the value of investment multiplier is also 1.
(B) When MPS = 1, the value of investment multiplier is 0
(C) When MPS = 0.5, the value of investment multiplier is 1.
(D) When MPS = 1, the value of investment multiplier is 0.5.

11. (a) Differentiate between money multiplier and investment multiplier. [2]

(b) Name the policy, which controls the money supply, credit availability and its cost.

[1]

12. Explain the changes that take place in an economy when Aggregate Demand is less than Aggregate Supply. [3]

13. Calculate Multiplier when MPC changes from 3/5 to 1/4. From the calculations establish the relation between the size of the Multiplier and the size of MPC?


[4]

14. (a) Calculate Marginal Propensity to Consume from the following data about an economy which is in equilibrium: National Income = 2,000 Autonomous Consumption Expenditure = 200 Investment Expenditure = 100

[3]

(b) How will the investment multiplier effect the income level?         [1]

15. As a result of increase in investment by `60 crore. National Income rises by `240 crore. Calculate Marginal Propensity to Consume.
     [6]



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