Consumption and Investment Functions Model Question Paper

12th Standard EM

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Economics

Time : 01:00:00 Hrs
Total Marks : 50
5 x 1 = 5
1. The sum of the MPC and MPS is___________

(a)

1

(b)

2

(c)

0.1

(d)

1.1

2. As income increases, consumption will______

(a)

fall

(b)

not change

(c)

fluctuate

(d)

increase

3. It the MPC is 0.5, the multiplier is ____________

(a)

2

(b)

1/2

(c)

0.2

(d)

20

4. The term super multiplier was first used by

(a)

J.R.Hicks

(b)

R.G.D. Allen

(c)

Kahn

(d)

Keynes

5. Decrease in consumption at any given level of income is likely to lead

(a)

Lower aggregate demand

(b)

An increase in exports

(c)

Higher aggregate demand

(d)

An increase in Investment

6. 5 x 2 = 10
7. Define average propensity to consume (APC).

8. Define average propensity to save (APS).

9. Define Accelerator

10. What is leakages of multiplier?

11. What do you mean by investment?

12. 5 x 3 = 15
13. State the propositions of Keynes’s Psychological Law of Consumption

14. Differentiate autonomous and induced investment.

15. State the concept of super multiplier

16. Draw the diagram depicting the psychological law of consumption.

17. Given the diagram, write the proposition for consumptions function.

18. 4 x 5 = 20
19. Briefly explain the subjective and objective factors of consumption function?

20. What are the differences between MEC and MEI.

21. Explain Marginal propensity to consume and multiplier, with the help of a diagram.

22. Derive the value of the multiplier assuming the basic form of the consumption function as C = a + bY where "a" is autonomous consumption and "b" is the marginal propensity to consume. You may assume a two-sector economy.