# MCQ Questions Chapter 10 Determination of Income and Employment Class 12 Economics

Please refer to MCQ Questions Chapter 10 Determination of Income and Employment Class 12 Economics with answers provided below. These multiple-choice questions have been developed based on the latest NCERT book for class 12 Economics issued for the current academic year. We have provided MCQ Questions for Class 12 Economics for all chapters on our website. Students should learn the objective based questions for Chapter 10 Determination of Income and Employment in Class 12 Economics provided below to get more marks in exams.

## Chapter 10 Determination of Income and Employment MCQ Questions

Please refer to the following Chapter 10 Determination of Income and Employment MCQ Questions Class 12 Economics with solutions for all important topics in the chapter.

MCQ Questions Answers for Chapter 10 Determination of Income and Employment Class 12 Economics

Question: Equilibrium level of income/ output and employment is viewed from which of the following approaches ?
b) S=I approach
c) Both (a) and (b)
d) None of these

C

Question: On account of injections and withdrawals, equilibrium level of income undergoes :
a) A shift
b) No shift
c) A dispersal
d) No change

A

Question: 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

B

Question: 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

A

Question: 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

D

Question: If MPC = 0, the multiplier will be:
a) 1
b) 0
c) 2
d) X

A

Question: 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

A

Question: Consumption function is a functional relationship between:
a) Income and saving
b) Price and consumption
c) Income and consumption
d) Income, consumption and saving

C

Question: 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

B

Question: If MPS is 0.6,what will be ΔS when income increases by Rs.100 ?
a) Rs. 60
b) Rs. 50
c) Rs. 40
d) Rs. 70

A

Question: Which of the following is correct ?
a) MPC÷MPS=1
b) 1-MPC=MPS
c) 1-MPS= MPC
d) All of these

D

Question: If MPC is 40 per cent, MPS will be
a) 70 percent
b) 60 percent
c) 50 percent
d) 40 percent

B

Question: 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

A

Question: 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

D

Question: If MPC = 0.9, than value of multiplier will be:
a) 6
b) 9
c) 10
d) 12

C

Question: The difference between fiscal and interest payment is called :
a) Revenue Deficit
b) Primary Deficit
c) Bbudget Deficit
d) Capital Deficit

B

Question: 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

C

Question: Multiplier=
a) ΔY/ΔS
b) ΔY/ΔI
c) ΔI/ΔY
d) ΔY/ΔC

B

Question: Deficient demand leads to :
a) Deflationary Gap
b) Inflationary Gap
c) Both and (a) and (b)
d) None of these

A

Question: Deflationary gap is measured as :
d) None of these

C

Question: 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

C

Question: Deficient or excess demand can be corrected through
a) Fiscal Policy
b) Monetary Policy
c) Both (a) and (b)
d) None of these

C

Question: A tax the burden of which can be shifted on to others, is called :
a) Indirect Tax
b) Direct Tax
d) Specific Tax

A

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

D

Question: Multiplier is estimated as:
a) 1/MPC
b) 1/1-MPC
c) 1/1+MPC
d) 1/1+MPS

B

Question: If MPS =1/4, the value of multiplier will be :
a) 4
b) 2
c) 8
d) 6

A

Question: 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

D

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

C

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

D

Question. 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

C

Question. 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

D

Question. According to Keynesian Theory, equilibrium level of income is determined at a level when:
a) Ex-ante Savings = Ex-ante Investments
b) Ex-post Saving = Ex-post Investments
c) Both a) and b)
d) Neither a) nor b)

A

Question. In the determination of equilibrium level of output, investment is assumed to be:
a) Induced
b) Autonomous
c) Both a) and b)
d) None of these

B

Question. In case of an underemployment equilibrium, which of the following alternative is not true?
a) Aggregate demand is equal to aggregate supply
b) There exist excess produciton capacity in the economy
c) Resources are not fully and efficiently utilised
d) Resources are fully and efficiently utilised

D

Question. Which of the following is not the reason for excess demand?
a) Fall in the propensity to consume
b) Reduction in taxes
c) Decrease in investments
d) Deficit Financing

A.C

Question. What is the shape of the Keynesian Aggregate Supply before the level of full employment is attained?
a) Perfectly inelastic
b) Perfectly elastic
c) Unitary elastic
d) More elastic

B

Question. If AS=C+S and AD=C+I , then equilibrium will be established at:
a) S=I
b) S>I
c) S<I
d) All of the above

A

Question. “Households and firms are planning to purchase less than what producers are planning to supply”. What are the possible reasons for this?
a) Aggregate demand=Aggregate supply
b) Aggregate demand>Aggressive supply
c) Aggregate demand<Aggregate supply
d) None of the above

C

Question. Out of the following, which can have a value more the one?
a) MPC
b) APC
c) APS
d) MPS

B

Question. __ refers to actual saving in an economy during a year.
a) Ex-ante saving
b) APS
c) MPS
d) Ex-post saving

D

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

D

Question. What is the cause of Keynesian perfectly elastic Aggregate Supply curve?
a) Wage price rigidity
b) Constant Marginal Product of Labour
c) Both of these
d) None of these

C

Question. What will be APC when APS = 0?
a) One
b) Zero
c) Two
d) Infinite

A

Question. If MPC = 0, the value of multiplier is:
a) 0
b) 1
c) Between 0 and 1
d) Infinity

B

Question. If at equilibrium level, National Income is ₹2,000 crores, Autonomous Consumption is ₹400 crores and Investment expenditure is ₹200 crore, then Marginal Propensity to Consume will be:
a) 0.6
b) 0.5
c) 0.8
d) 0.7

D

Question. Excess Demand can be controlled through:
a) Monetary Policy
b) Fiscal Policy
c) Both a) and b)
d) Neither a) nor b)

C

Question. If MPC is 0.6, the investment multiplier will be:
a) 1.67
b) 2.5
c) 6
d) 4

B

Question. Assertion (A): Saving function depicts linear relationship when MPS is found to be constant.
Reason (R): A linear saving function is a straight line savings function. The slope of a straight line is constant as indicated by constant MPS.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Both Assertion (A) and Reason (R) are false

A

Question. Assertion (A): At the time of full employment, there is an absence of involuntary unemployment.
Reason (R): Voluntary unemployment is not included while estimating the size of unemployment.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

B

Question. Assertion (A): In a situation of deficient demand, there is underemployment equilibrium in an economy.
Reason (R): Owing to deficient AD, equilibrium between desired AD and desired AS is struck at a lower level of GDP, lower than the full employment in an economy.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Both Assertion (A) and Reason (R) are false