NCERT MCQ ON National Income Determination and Multiplier:

Question1 :  Which of the following indicates AD in an open economy?

• a) Private (household) Consumption Expenditure
• b) Household Investment Expenditure
• c) Government expenditure + private consumption expenditure
• d) Household consumption expenditure+ investment expenditure + government expenditure + net exports

Answer :  Household consumption expenditure+ investment expenditure + government expenditure + net exports

Question2 :  Consumption function is a functional relationship between:

• a) Income and saving
• b) Price and consumption
• c) Income and consumption
• d) Income, consumption and saving

Answer :  Income and consumption

Question3 :  Propensity to consume means:

• a) Tendency of the consumer  towards higher consumption
• b) Ratio of consumption to income
• c) Level of income at which consumption expenditure is equal to income
• d) Additional income to be spent on consumption

Answer :  Ratio of consumption to income

Question 4:  Average propensity to consume (APC) equal to :

• a)
• b)
• c)
• d)

Answer :

Question 5:  MPC being equal to 0.5, what will be , if income increases by Rs.100?

• a) Rs. 60
• b) Rs. 50
• c) Rs. 40
• d) Rs. 70

Answer :  Rs. 50

Question 6:  Propensity to save means:

• a) Ratio of saving to income
• b) level of income at which saving is equal to income
• c) Additional income that is not to be saved
• d) None of these

Answer :  Ratio of saving to income

Question7 :  If MPS is 0.6,what will be ∆S when income increases by Rs.100 ? 

• a) Rs. 60
• b) Rs. 50
• c) Rs. 40
• d) Rs.70

Answer :  Rs. 60

Question 8:  Average propensity (APS) is equal to:

• a)
• b)
• c)
• d)

Answer :

Question 9:  Which of the following is correct ?

• a) MPC÷MPS=1         
• b) 1-MPC=MPS
• c) 1-MPS= MPC
• d) All of these

Answer :  All of these

Question10 :  If MPC is 40 per cent, MPS will be

• a) 70 percent
• b) 60 percent
• c) 50 percent
• d) 40 percent

Answer :  60 percent

Question 11:  Since As= C+S and AD=C+I the equilibrium will be established where C+S= C+I, or where:

• a) S=I     
• b) S>I
• c) S<I 
• d) All the above

Answer :  S=I     

Question12 :  Equilibrium level of income/ output and employment is viewed from which of the following approaches ?

• a) AS=AD approach
• b) S=I approach
• c) Both (a) and (b) 
• d) None of these

Answer :  Both (a) and (b) 

Question13 :  On account of injections and withdrawals, equilibrium level of income undergoes :

• a) A shift
• b) No shift
• c) A dispersal 
• d) No change

Answer :  A shift

Question 14:  According to Keynes, equality (equilibrium) between AD and AS can take place in a situation

• a) Less than full employment
• b) Full employment
• c) Beyond full employment  
• d) All of these

Answer :  All of these

Question 15:  If MPC = 0.9, than value of multiplier will be:

• a) 6        
• b) 9
• c) 10
• d) 12

Answer :  10

Question16 :  Multiplier=

• a) ∆Y/∆S
• b) ∆Y/∆I
• c) ∆I/∆Y
• d) ∆Y/∆C

Answer :  ∆Y/∆I

Question17 :  Multiplier is estimated as:

• a) 1/MPC
• b) 1/1-MPC
• c) 1/1+MPC    
• d) 1/1+MPS

Answer :  1/1-MPC

Question18 :  If MPS =1/4, the value of multiplier will be :

• a) 4
• b) 2
• c) 8
• d) 6

Answer :  4

Question 19:  If MPC = 0, the multiplier will be:

• a) 1
• b) 0
• c) 2
• d) X

Answer :  1

Question20 :  If an investment of Rs. 10 crore results in an increase in income by Rs 50 crore, then the multiplier will be:

• a) 5
• b) 4
• c) 2 
• d) None of these

Answer :  5

Question 21:  Deficient demand leads to :

• a) Deflationary Gap
• b) Inflationary Gap
• c) Both and (a) and (b)  
• d) None of these

Answer :  Deflationary Gap

Question 22:  Deflationary gap is measured as :

• a) AD_F + AD_U
• b) AD_F÷ AD_U
• c) AD_F – AD_U
• d) None of these

Answer :  AD_F– AD_U

Question 23:  Which of the following does not lead to fall in AD ?

• a) Fall in private consumption expenditure
• b) Fall in export
• c) Fall in Import
• d) Fall in Government Expenditure

Answer :  Fall in Import

Question24 :  Deficient or excess demand can be corrected through

• a) Fiscal Policy
• b) Monetary Policy
• c) Both (a) and (b)   
• d) None of these

Answer :  Both (a) and (b)   

Question25 :  With a view to correcting deflationary gap or deficient demand, which of the following fiscal policy measures should be adopted ?

• a) Reduction in taxes
• b) Increase in public expenditure
• c) Reduction in public debt
• d) All of these

Answer :  All of these

Question26 :  Which of the following leads to increase in AD ?

• a) Fall in imports
• b) Increase in investment expenditure
• c) Increase in government expenditure
• d) All of these

Answer :  All of these

Question27 :  Of the following, what are the quantitative measures of monetary policy ?

• a) Repo rate
• b) Open market operations 
• c) SLR
• d) All of these

Answer :  All of these

Question28 :  A tax the burden of which can be shifted on to others, is called :

• a) Indirect Tax
• b) Direct Tax
• c) Ad Valorem
• d) Specific Tax

Answer :  Indirect Tax

Question29 :  The difference between fiscal and interest payment is called :

• a) Revenue Deficit
• b) Primary Deficit 
• c) Bbudget Deficit
• d) Capital Deficit

Answer :  Primary Deficit 

Question30 :  If the value exports exceeds the value of visible imports, the current account deficit will be:

• a) Positive
• b) Negative
• c) Positive or Negative 
• d) None of these

Answer :  Positive or Negative