Practice MCQs | Chapter 4 Determination of Income and Employment

MCQ Page Ref: Page 52

Aggregate demand refers to:

A. Demand for one commodity

B. Total demand for goods and services in the economy

C. Household demand only

D. Government demand only

Correct Answer / Reference:

Option: B. Total demand for goods and services in the economy

Reference: Found on Page Page 52

MCQ Page Ref: Page 53

Aggregate supply refers to:

A. Supply by one producer

B. Total output produced in the economy

C. Foreign supply only

D. Household production only

Correct Answer / Reference:

Option: B. Total output produced in the economy

Reference: Found on Page Page 53

MCQ Page Ref: Page 54

Equilibrium level of income is determined when:

A. Consumption exceeds savings

B. Aggregate demand equals aggregate supply

C. Investment exceeds income

D. Exports exceed imports

Correct Answer / Reference:

Option: B. Aggregate demand equals aggregate supply

Reference: Found on Page Page 54

MCQ Page Ref: Page 55

Consumption function shows the relationship between:

A. Income and consumption

B. Income and exports

C. Savings and imports

D. Production and taxes

Correct Answer / Reference:

Option: A. Income and consumption

Reference: Found on Page Page 55

MCQ Page Ref: Page 56

The marginal propensity to consume (MPC) refers to:

A. Ratio of total savings to income

B. Increase in consumption due to increase in income

C. Ratio of exports to imports

D. Increase in taxes due to income rise

Correct Answer / Reference:

Option: B. Increase in consumption due to increase in income

Reference: Found on Page Page 56

MCQ Page Ref: Page 56

The value of MPC always lies between:

A. 0 and 1

B. 1 and 2

C. 2 and 3

D. –1 and 1

Correct Answer / Reference:

Option: A. 0 and 1

Reference: Found on Page Page 56

MCQ Page Ref: Page 57

Savings function shows the relationship between:

A. Savings and income

B. Consumption and production

C. Exports and imports

D. Taxes and investment

Correct Answer / Reference:

Option: A. Savings and income

Reference: Found on Page Page 57

MCQ Page Ref: Page 59

Investment multiplier measures:

A. Fall in savings

B. Increase in income due to increase in investment

C. Increase in taxes

D. Rise in exports only

Correct Answer / Reference:

Option: B. Increase in income due to increase in investment

Reference: Found on Page Page 59

MCQ Page Ref: Page 59

The multiplier value depends on:

A. Tax rate

B. MPC

C. Imports

D. Exports

Correct Answer / Reference:

Option: B. MPC

Reference: Found on Page Page 59

MCQ Page Ref: Page 59

When MPC increases, multiplier value:

A. Decreases

B. Remains constant

C. Increases

D. Becomes zero

Correct Answer / Reference:

Option: C. Increases

Reference: Found on Page Page 59