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Consumption and Investment Functions 1 Mark Book Back Question Paper With Answer Key

12th Standard

    Reg.No. :
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Economics

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

    Multiple Choice Question

    20 x 1 = 20
  1. The average propensity to consume is measured by

    (a)

    C/Y

    (b)

    CxY

    (c)

    Y/C

    (d)

    C+Y

  2. 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

  3. 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

  4. If the Keynesian consumption function is C=10+0.8Y then, when disposable income is Rs 100, what is the marginal propensity to consume?

    (a)

    Rs.0.8

    (b)

    Rs.800

    (c)

    Rs.810

    (d)

    Rs.0.81

  5. If the Keynesian consumption function is C=10+0.8 Y then, and disposable income is Rs.100, what is the average propensity to consume?

    (a)

    Rs.0.8

    (b)

    Rs.800

    (c)

    Rs.810

    (d)

    Rs.0.9

  6. As national income increases

    (a)

    The APC falls and gets nearer in value to the MPC

    (b)

    The APC increases and diverges in value from the MPC.

    (c)

    The APC stays constant

    (d)

    The APC always approaches infinity

  7. As increase in consumption at any given level of income is likely to lead

    (a)

    Higher aggregate demand

    (b)

    An increase in exports

    (c)

    A fall in taxation revenue

    (d)

    A decrease in import spending

  8. Lower interest rates are likely to :

    (a)

    Decrease in consumption

    (b)

    increase cost of borrowing

    (c)

    Encourage saving

    (d)

    increase borrowing and spending

  9. The MPC is equal to :

    (a)

    Total spending / total consumption

    (b)

    Total consumption / total income

    (c)

    Change in consumption / change in income

    (d)

    none of the above

  10. 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

  11. The sum of the MPC and MPS is___________

    (a)

    1

    (b)

    2

    (c)

    0.1

    (d)

    1.1

  12. As income increases, consumption will______

    (a)

    fall

    (b)

    not change

    (c)

    fluctuate

    (d)

    increase

  13. 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

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

    (a)

    Consumption, income

    (b)

    investment, output

    (c)

    savings, investment

    (d)

    output, aggregate demand

  15. The multiplier is calculated as

    (a)

    1/(1-MPC)

    (b)

    1/MPS

    (c)

    1/MPC

    (d)

    a and b

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

    (a)

    2

    (b)

    1/2

    (c)

    0.2

    (d)

    20

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

    (a)

    Reduces

    (b)

    increase

    (c)

    does not change

    (d)

    changes

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

    (a)

    Demand

    (b)

    Supply

    (c)

    Income

    (d)

    Rate of interest

  19. The term super multiplier was first used by

    (a)

    J.R.Hicks

    (b)

    R.G.D. Allen

    (c)

    Kahn

    (d)

    Keynes

  20. The term MEC was introduced by

    (a)

    Adam Smith

    (b)

    J.M. Keynes

    (c)

    Ricardo

    (d)

    Malthus

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