If the Keynesian consumption function is C=10+0.8 Y then, if disposable income is Rs 1000, what is amount of total consumption?

(a)

Rs.0.8

(b)

Rs.800

(c)

Rs.810

(d)

Rs.0.81

The sum of the MPC and MPS is___________

(a)

1

(b)

2

(c)

0.1

(d)

1.1

When investment is assumed autonomous the slope of the AD schedule is determined by the______

(a)

marginal propensity to invest

(b)

disposable income

(c)

marginal propensity to consume

(d)

average propensity to consume

The multiplier is calculated as

(a)

1/(1-MPC)

(b)

1/MPS

(c)

1/MPC

(d)

a and b

In an open economy import _________ the value of the multiplier

(a)

Reduces

(b)

increase

(c)

does not change

(d)

changes

If the Keynesian consumption function is C = 10 + 0.8Y then, if disposable income is Rs 1000, what is amount of total saving?

(a)

810

(b)

190

(c)

0.8

(d)

0.81

What is the nature of the relationship between the national income and induced investment?

(a)

positive

(b)

negative

(c)

zero

(d)

infinite

Find the value of K, if MPC is 0.75, MPS is 0.25.

(a)

8

(b)

4

(c)

1

(d)

2

If there is _______ in the consumer goods industry, the accelerator principle would not work.

(a)

Full capacity

(b)

unused or excess capacity

(c)

No capacity

(d)

None

In a closed economy, the value of multiplier, when MPC is 0.90

(a)

25

(b)

90

(c)

10

(d)

9

Autonomous investment is

(a)

Income inelastic

(b)

Instable

(c)

Interest elastic

(d)

Income elastic

Value of MPC is

(a)

>1

(b)

<1

(c)

0

(d)

0 ≤ MPC ≥ 1

According to Keynes the most important determinant of investment

(a)

MEC

(b)

Effective demand

(c)

Aggregate demand

(d)

Rate of interest

Keynes considered subjective and objective factors:

(a)

Important determinants of consumption

(b)

Unimportant determinants of consumption

(c)

Determinants of investment

(d)

Determinants of business’s willingness to pay

Which of the following is correct?

(a)

1+ MPS = MPC

(b)

1- MPC = MPS

(c)

MPC + MPS > 1

(d)

MPC + MPS < 1

Assertion: The multiplier is directly related to MPC and inversely related to MPS.
Reason: The accelerator principle explains the effect of changing consumption expenditure upon volume of investment.

(a)

Both (A) and (R) are true and (R) is the correct explanation of (A)

(b)

Both (A) and (R) are true, but (R) is not the correct explanation of (A)

(c)

(A) is true, but (R) is false

(d)

(A) is false, but (R) is true

Assertion: J.B. Say propounded the fundamental Psychological Law of Consumption which forms the basis of the consumption function.
Reason: The law implies that there is a tendency on the part of the people to spend on consumption less than the full increment of income.

(a)

Both A and R are true and R is the correct explanation of A

(b)

Both A and R are true but R is not the correct explanation of A

(c)

A is true but R is false

(d)

A is false but R is true

Assertion: The progressive tax system increases the propensity to consume of the people by altering the income distribution in favour of poor.
Reason: When government reduces the tax the disposable income rises and the propensity to consume of community increases.

(a)

Both A and R are true and R is the correct explanation of A

(b)

Both A and R are true but R is not the correct explanation of A

(c)

A is true but R is false

(d)

A is false but R is true

The marginal propensity to consume is:

(a)

increasing if the marginal propensity to save is increasing

(b)

the proportion of total disposable income that the average family consumes

(c)

the change in consumer spending divided by the change in aggregate disposable income

(d)

the change in consumer spending minus the change in aggregate disposable income

Match the correct codes

1	The motive of enterprise	i	desire to do forward trading
2	The motive of pride	ii	desire to bequeath a fortune
3	The motive of avarice	iii	purely miserly instinct
4	The motive of financial independence	iv	Economic Freedom

(a)

(1) – (i) (2) – (ii) (3) – (iv) (4) – (iii)

(b)

(1) – (ii) (2) – (iii) (3) – (iv) (4) – (i)

(c)

(1) – (iv) (2) – (iii) (3) – (i) (4) – (ii)

(d)

(1) – (i) (2) – (ii) (3) – (iii) (4) – (iv)