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

12th Standard

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Economics

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

    Answer all the questions

    20 x 1 = 20
  1. An increase in the marginal propensity to consume will:

    (a)

    Lead to consumption function becoming steeper

    (b)

    Shift the consumption function upwards

    (c)

    Shift the consumption function downwards

    (d)

    Shift savings function upwards

  2. Lower interest rates are likely to :

    (a)

    Decrease in consumption

    (b)

    increase cost of borrowing

    (c)

    Encourage saving

    (d)

    increase borrowing and spending

  3. As income increases, consumption will______

    (a)

    fall

    (b)

    not change

    (c)

    fluctuate

    (d)

    increase

  4. According to Keynes, investment is a function of the MEC and _________

    (a)

    Demand

    (b)

    Supply

    (c)

    Income

    (d)

    Rate of interest

  5. The marginal propensity save _________________

    (a)

    ΔC/ΔY

    (b)

    ΔS/ΔY

    (c)

    ΔP/ΔQ

    (d)

    C/Y*ΔP/ΔQ

  6. The expected rate 'of profit technically means __________

    (a)

    Marginal efficiency of capital

    (b)

    Aggregate Demand

    (c)

    The principle of effective demand

    (d)

    Consumption function

  7. The concept of multiplier was first developed by ______________ in terms of employment.

    (a)

    R.F.Khan

    (b)

    J.M Keynes

    (c)

    H.F.Khan

    (d)

    M.J.Keynes

  8. "The consumption expenditure depends not only on his current income but also past income and standard of living" Who said this?

    (a)

    J.M.Keynes

    (b)

    R.F.Khan

    (c)

    J.R Hicks

    (d)

    Duesenberry

  9. When MPC+ MPS=1, which one of the following is wrong?

    (a)

    MPS = MPC

    (b)

    MPC + MPC > 1

    (c)

    MPS = 1 - MPC

    (d)

    MPC = 1 - MPS

  10. Assertion (A) When income increases, consumption expenditure also increases but by a smaller amount.
    Reason (R) As income increases, our wants are satisfied side by side, so that the need to spend more on consumer goods diminishes.

    (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.

  11. Who is the proponent of the following statement? “The community with more equal distribution of income tends to have high propensity to consume.”

    (a)

    Keynes

    (b)

    V.K.R.V. Rao

    (c)

    Hicks

    (d)

    Say

  12. What is relevant in the context of MEC?
    I. The prospective yield from a capital asset.
    II. The supply price of a capital asset.

    (a)

    I only relevant

    (b)

    II only relevant

    (c)

    Both I and II are relevant

    (d)

    Both are irrelevant

  13. Which one of the following factor that is not taken into consideration while making any investment decision

    (a)

    The cost of the capital asset

    (b)

    The expected rate of return from during its lifetime

    (c)

    The Marginal propensity to save

    (d)

    The market rate of interest

  14. The systematic development of the simple accelerator model was made by ______

    (a)

    J.M.Clar

    (b)

    J.M.Keynes

    (c)

    R.F. Khan

    (d)

    Learner

  15. When MPS = 0.2, MPC will be

    (a)

    0.8

    (b)

    0.2

    (c)

    1.2

    (d)

    20

  16. According to Keynes the most important determinant of consumption

    (a)

    Rate of interest

    (b)

    Saving

    (c)

    Income

    (d)

    Investment

  17. Which of the following is not correct:

    (a)

    MPC declines as income increase

    (b)

    MPC is positive but less than one

    (c)

    MPS is always positive

    (d)

    All the above

  18. The marginal propensity to save is defined as:

    (a)

    1-ΔC/ΔY

    (b)

    S/Y

    (c)

    Y/S

    (d)

    Y/ΔS

  19. Assertion (A): The multiplier refers to the change in national income resulting from change in investment.
    Reason (R): The value of multiplier itself depends on consumption function or marginal propensity to consume.

    (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.

  20. Assertion (A): The marginal efficiency of capital is also affected by waves of optimism and pessimism in the business cycle.
    Reason (R): If businessmen are optimistic about future, the MEC will be likely to be high. During periods of pessimism the MEC is under estimated and so will be low.

    (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.

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