MCQ Questions for Class 12 Economics Chapter 10 Determination of Income and Employment with Answers (2024)

Determination of Income and Employment Class 12 MCQs Questions with Answers

Question 1.
Supply creates its own Demand. Who gave this law ?
(a) J.B.Say
(b) J.S.Mill
(c) Keynes
(d) Ricardo

Question 2.
Who is the author of the book ‘General Theory of Employment, Interest and Money’ ?
(a) A.C. Pigou
(b) Malthus
(c) J.M. Keynes
(d) Marshall

Question 3.
Which of the following is true for Classical Theory of Employment ?
(a) State of full employment in the economy
(b) No possibility of over-or under-production in the economy
(c) Both (a) and (b)
(d) None of the above

Question 4.
On which factor Keynesian Theory of Employment depends ?
(a) Effective Demand
(b) Supply
(c) Production Efficiency
(d) None of the above

Question 5.
Which is the determining factor for investment ?
(a) Marginal Efficiency of Capital
(b) Interest Rate
(c) Both (a) and (b)
(d) None of these

Question 6.
According to Keynes, investment implies :
(a) Financial Investment
(b) Real Investment
(c) Both (a) and (b)
(d) None of the above

Question 7.
With increase in investment, MEC :
(a) Rises
(b) Falls
(c) Remains Constant
(d) None of these

Question 8.
Which of the following is a Read Investment ?
(a) Purchasing of a Share
(b) Purchasing of Old Factory
(c) Construction of Buildings
(d) Opening Deposit Account in the Bank

Question 9.
APC + APS = ?
(a) ∞
(b) 2
(c) 1
(d) 0

Question 10.
MPC = MPS = ?
(a) ∞
(b) 2
(c) 1
(d) 0

Question 11.
Which or is true ?
(a) MPC + MPS = 0
(b) MPC + MPS < 1
(c) MPC + MPS = 1
(d) MPC + MPS > 1

Question 12.
The main component of aggregate demand is :
(a) Individual consumption
(b) Public consumption
(c) Investment
(d) All the above

Question 13.
Who is the writer of the book, “Traited Economic Politique” ?
(a) Pigour
(b) J.B. Say
(c) Keynes
(d) Ricardo

Question 14.
IF MPC = 0.5, then Multiplier (k) will be:
(a) 1/4
(b) = 0
(c) 1
(d) 2

Question 15.
On which concept does classical viewpoint depend ?
(a) Say’s law of Market
(b) perfect Flexibility of Wage Rate
(c) Perfect Flexibility of Interest Rate
(d) All of these

Question 16.
“Wage cut maintains full employment in the economy.” Who put forward this view ? ‘
(a) Pigou
(b) Keynes
(c) Marshall
(d) None of the above

Question 17.
Which one of the following is the determining factor of Equilibrium Income is Keynesian View point ?
(a) Aggregate Demand
(b) Aggregate Supply
(c) Both (a) and (b)
(d) None of the above

Question 18.
In Keynesian viewpoint, the equilibrium level of income and employment in the economy will be established where:
(a) AD > AS
(b) AS > AD
(c) AD = AS
(d) None of these

Question 19.
According to saving-investment viewpoint, income employment equilibrium will be determined at a point where:
(a) S > I
(b) I > S
(c) S = I
(d) None of these

Question 20.
Increase in aggregate demand of equilibrium level of income and employment causes increase in :
(a) Employment
(b) Production
(c) Income
(d) All of these

Question 21.
Which one is correct ?
(a) Y = C + I
(b) Y = 0 = N
(c) C + S = C + I
(d) All of these

Question 22.
Keynes theory is associated with :
(a) Effective demand
(b) Propensity to consume
(c) Propensity to save
(d) All of these

Question 23.
Keynesian multiplier establishes relationship between :
(a) Investment and Income
(b) Income and Consumption
(c) Saving and Investment
(d) None of the above

Question 24.
Which one is correct ?
(a) K = \(\frac{1}{MPC}\)
(b) K = \(\frac{1}{MPS}\)
(c) K = \(\frac{1}{1-MPS}\)
(d) K = \(\frac{1}{1+MPS}\)

Question 25.
Multiplier can be expressed as:
(a) K = \(\frac{\Delta \mathrm{S}}{\Delta \mathrm{I}}\)
(b) K = \(\frac{\Delta \mathrm{Y}}{\Delta \mathrm{I}}\)
(c) K = I – S
(d) None of these

Question 26.
Keynes derived Investment Multiplier from Kahn’s :
(a) Income Multiplier
(b) Consumption Multiplier
(c) Employment Multiplier
(d) None of the above

Question 27.
The value of Keynesian Investment Multiplier depends on:
(a) Income Level
(b) Marginal Productivity of Capital
(c) Marginal Propensity to Consumer
(d) Investment Level

Question 28.
Which factor affects Keynesian Multiplier ?
(a) Marginal Propensity to Save
(b) Marginal Propensity to Consumer
(c) Both (a) and (b)
(d) None of the above

Question 29.
Which of the following is correct ?
(a) MPC and multiplier have direct relationship ,
(b) MPS and multipler have inverse relationship
(c) Both (a) and (b)
(d) None of the above

Question 30.
The value of MPC is:
(a) 1
(b) 0
(c) Greater than 0 but less than 1
(d) ∞

Question 31.
If MPC = 0.5, then multiplier (K) will be:
(a) 1/2
(b) 1
(c) 2
(d) 0

Question 32.
If MPC = 0.5 and initial investment is 100 Rs crores, the income generation in the economy will be :
(a) 5 crores Rs
(b) 100 crores Rs
(c) 200 crores Rs
(d) 500 crores Rs

Question 33.
‘The theory of employment multiplier was propounded by:
(a) Keynes
(b) Kahn
(c) Hansen
(d) Marshall

Question 34.
If income equilibrium level in the economy is determined at the level before full employment, it is known as the state of:
(a) Deficit Demand
(b) Surplus Demand
(c) Partial Demand
(d) None of these

Question 35.
In Keynesian economics, the state of Deficit Demand is called as:
(a) Full Employment Equilibrium
(b) Under Full Employment Equilibrium
(c) Both (a) and (b)
(d) None of the above

Question 36.
What are the characteristics of Deficit Demand ?
(a) Aggregate Demand falls short of Aggregate Demand required at full employment
(b) Aggregate Demand remains short of Aggregate Supply required of full employment level
(c) Both (a) and (b)
(d) None of above

Question 37.
Deflationary Gap shows the measurement of:
(a) Deficit Demand
(b) Surplus Demand
(c) Full Employment
(d) None of these

Question 38.
Which one is the reason of appearing Deficit Demand condition ?
(a) Fall in the money supply in the country
(b) Fall in investment demand as a result of rise in bank rate
(c) Fall in disposable income and consumption demand due to increase in taxes
(d) All the above

Question 39.
Which of the following is true ?
(a) Employment level declines due to decrease in demand
(b) Price level falls due to deficient demand in the country
(c) Production level falls deficient demand
(d) All the above

Question 40.
The ‘difference between the Aggregate Demand at above full employment and Aggregate Demand at full employment is known as :
(a) Inflationary Gap
(b) Deflationary Gap
(c) Both (a) and (b)
(d) None of the above

Question 41.
Which of the following is a reason of surplus demand ?
(a) Increase in Public Expenditure
(b) Increase in Money Supply
(c) Fall in Taxes
(d) All the above

Question 42.
In the situation of deflationary gap :
(a) Demand increases rapidly
(b) Supply increase rapidly
(c) Both demand and supply are equal
(d) All of these

Question 43.
Which of the following cause trade cycle ?
(a) Deflationary Conditions
(b) Inflationary Conditions
(c) Both (a) and (b)
(d) None of these

Question 44.
Which one is the corrective measure for Deficient Demand ?
(a) Fiscal Measures
(b) Monetary Measures
(c) Both (a) & (b)
(d) None of the above

Question 45.
Which measure is included in Fiscal Measures ?
(a) Public Expenditure
(b) Taxation
(c) Public Debt
(d) All of these

Question 46.
Which fiscal measure should be adopted for correcting Deficient Demand ?
(a) Government should spend more in public works
(b) Taxation should be reduced
(c) Pubic debt should be reduced
(d) All the above

Question 47.
With which component of Monetary Policy, Central Bank tries to atain economic stability in the countrey ?
(a) Supply of Money
(b) Interest Rate
(c) Availability of Money
(d) All of these

Question 48.
Which method Central Bank adopts for controlling quantitative of credit ?
(a) Bank Rate
(b) Open Market Operations
(c) Change in Cash Reserve Ratio
(d) All the above

Question 49.
Which is a qualitative method of controlling credit ?
(a) Change in Margin Requirements of Loanee
(b) Credit Rationing
(c) Direct Action
(d) All of these

Question 50.
Which monetary measure may be adopted to correct Deficient Demand ?
(a) Reduction in Bank Rate
(b) Buying Securities in Open Markey
(c) Reducing Cash Reserve Ratio
(d) All the above

Question 51.
Which fiscal measure is to be adopted in correcting Inflationary Gap ?
(a) Reduction in Public Expenditure
(b) Increase in taxes
(c) Increase in Public debt
(d) All of these

Question 52.
Which monetary measure is to be adopted in correcting Inflationary
(a) Increase in Bank Rate
(b) Selling of Securities in Open Market
(c) Increase in Cash Reserve Ratio
(d) All the above

Question 53.
Income and employment are determined by:
(a) Total demand
(b) Total supply
(c) Total demand and total supply both
(d) By market demand.

Question 54.
The relation between consumption and savings are:
(a) Inverse
(b) Direct
(c) Inverse and direct both
(d) Neither inverse nor direct.

Question 55.
When an economy their to save all its extra income then investment calculation will be:
(a) 1
(b) Uncertain
(c) 0
(d) Infinite.

Question 56.
“Supply creates it own demand”. This statement was given by the economist:
(a) Keynes
(b) Pigou
(c) J. B.Say
(d) Adam Smith.

Question 57.
Classical theory is based on the assumption of:
(a) Say’s law of market
(b) Flexibility in wage rates
(c) Flexibility in interest rate
(d) All of the above.

Fill in the blanks:

1. ……………………. refers to highest rate of return over cost expected from marginal or additional unit of a capital asset.

2. Deflationary gap is the measurement of ……………………. demand.

3. Deficit demand indicates ……………………. gap.

4. In case of excess demand bank rate …………………….

5. Multiplier can also ……………………. in opposite direction.

6. The point at which aggregate demand and aggregate supply are equal is known as …………………….

7. Unemployment is the result of …………………….

8. Propensity to consume shows relation between ……………………. and distributed income.

State true or false:

1. Full employment does not mean zero unemployment.

2. Increase in interest rate in future, will reduce the savings.

3. Consumption expenditure does not increase in the same proportion as income increases.

4. Theories of employment was propounded by Marshall.

5. Unemployment is the result of deficit demand.

6. Keynes theory also applies to underdeveloped countries.

7. Keynes theory is based on the concept of full employment.

Match the following: