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#### Consumption and Investment Functions Model Question Paper 1

12th Standard EM

Reg.No. :
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Economics

Time : 01:00:00 Hrs
Total Marks : 50
5 x 1 = 5
1. Lower interest rates are likely to :

(a)

Decrease in consumption

(b)

increase cost of borrowing

(c)

Encourage saving

(d)

increase borrowing and spending

2. The relationship between total spending on consumption and the total income is the_________

(a)

Consumption function

(b)

Savings function

(c)

Investment function

(d)

aggregate demand function

3. The multiplier tells us how much __________ changes after a shift in _____

(a)

Consumption , income

(b)

investment, output

(c)

savings, investment

(d)

output, aggregate demand

4. 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

5. If the MPC = 0.6, find MPS

(a)

1

(b)

0.4

(c)

0.6

(d)

2

6. 5 x 2 = 10
7. Define average propensity to save (APS).

8. Define Multiplier.

9. What do you mean by investment?

10. What is leakages of multiplier?

11. What is saving?

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. Write the formula for APC, MPC, APS, MPS.

17. Draw the diagrams for Autonomous investment and induced investment.

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. What are the determinants of investment function?

22. What are the factors on which MEC depends? Also give details on the factors which influence MEC.