12th Standard Economics Consumption and Investment Functions English Medium Free Online Test One Mark Questions 2020 - 2021

12th Standard

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Economics

Time : 00:20:00 Hrs
Total Marks : 20

20 x 1 = 20
1. 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

2. The sum of the MPC and MPS is___________

(a)

1

(b)

2

(c)

0.1

(d)

1.1

3. 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

4. The multiplier is calculated as

(a)

1/(1-MPC)

(b)

1/MPS

(c)

1/MPC

(d)

a and b

5. In an open economy import _________ the value of the multiplier

(a)

Reduces

(b)

increase

(c)

does not change

(d)

changes

6. 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

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

(a)

positive

(b)

negative

(c)

zero

(d)

infinite

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

(a)

8

(b)

4

(c)

1

(d)

2

9. 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

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

(a)

25

(b)

90

(c)

10

(d)

9

11. Autonomous investment is

(a)

Income inelastic

(b)

Instable

(c)

Interest elastic

(d)

Income elastic

12. Value of MPC is

(a)

>1

(b)

<1

(c)

0

(d)

0 ≤ MPC ≥ 1

13. According to Keynes the most important determinant of investment

(a)

MEC

(b)

Effective demand

(c)

Aggregate demand

(d)

Rate of interest

14. 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

15. Which of the following is correct?

(a)

1+ MPS = MPC

(b)

1- MPC = MPS

(c)

MPC + MPS > 1

(d)

MPC + MPS < 1

16. 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

17. 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

18. 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

19. 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

20. 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)