# 100 MCQs of Aggregate Demand and Related Concepts Macroeconomics class 12

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## Multiple Choice Questions of Aggregate Demand and Related Concepts chapter with answers of Macroeconomics class 12

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Out of the following, which can have a value more the one?

a) MPC
b) APC
c) APS
d) MPS

Ans – b)

Which of the following is not a component of aggregate demand in a two sector economy?

a) Net Exports
b) Government Expenditure
c) Consumption
d) Both a) and b)

Ans – d)

Break-even point is achieved when:

a) National Income = Consumption
b) Consumption = Saving
c) Saving = 0
d) National Income > Consumption

Ans – a), c)

a) Horizontal straight line parallel to the X-axis
b) Positively sloped curve
c) Negatively sloped curve
d) Vertical straight line parallel to the Y-axis

Ans – b)

Aggregate supply and _ are always equal.

a) National Income
b) Aggregate Demand
c) Marginal Propensity to save
d) Average Propensity to consume

Ans – a)

Consumption function is the functional relationship between _ and ___ .

a) Consumption, Aggregate demand
b) Consumption, National Income
c) Aggregate Demand, Aggregate Supply
d) National Income, Private Income

Ans – b)

Tick the wrong option:

a) APC can be more than 1
b) APC can be equal to 1
c) APC rises with increases in income
d) APC can be less than 0

Ans – c), d)

__ refers to actual saving in an economy during a year.

a) Ex-ante saving
b) APS
c) MPS
d) Ex-post saving

Ans – d)

Which of the following is not true about AD in a two sector economy?

a) AD = Consumption + saving
b) AD curve starts from some point above the origin
c) AD = Consumption + Investment
d) AD curve has a positive slope

Ans – a)

Which of the following fact is correct about MPC?

a) Value of MPC varies between 0 and 1
b) MPC of poor is more than that of rich
c) MPC falls with successive increase in income
d) MPC can be more than 1

Ans – a), b), c)

Which of these is a component of Aggregate Demand.

a) Private consumption expenditure
b) Investment expenditure
c) Savings
d) All of these

Ans – a), b)

Which of the following can have a negative value?

a) APC
b) MPC
c) MPS
d) APS

Ans – d)

a) From the origin
b) Point Below the origin
c) Point above the origin
d) None of these

Ans – c)

If investment falls to zero, national income does not fall to zero because of:

a) Autonomous Consumption
b) Induced Investment
c) Autonomous Investment
d) Multiplier

Ans – a)

The value of _ can never be negative, while ___ can have a value eqaul to one.

a) APS, APC
b) MPC, APS
c) APC, APS
d) MPS, APC

Ans – d)

Which of the following expression is correct?

a) APC = Consumption/National Income
b) APC = Change in Consumption/Change in National Income
c) APC = 1 – APS
d) APC = National Income/Consumption

Ans – a), C)

If C – 100 + 0.75Y, then Saving Function will be expressed as:

a) S = 100 + 0.25Y
b) S = -100 + 0.75Y
c) S = -100 + 0.25Y
d) S = 75 + 0.25Y

Ans – c)

At the break-even point:

a) Consumption curve lies below the 45 degree line
b) Consumption curve intersects 45 degree line
c) Consumption curve lies above the 45 degree line
d) None of these

Ans – b)

Suppose in a hypothetical economy, hte income rises from ₹5,000 crores to ₹6,000 crores. As a result,
the consumption expenditure rises from ₹4,000 crores to ₹4,600 crores. Marginal propensity to
consume in such a case would be __ .

a) 0.8
b) 0.4
c) 0.2
d) 0.6

Ans – d)

Average Propensity to consume can never be __ .

a) positive
b) zero
c) more than one
d) less than one

Ans – b)

Which of the following is correct?

a) MPC + APC = 1
b) MPC + APS = 1
c) MPC + MPS = 1
d) MPC – MPS = 1

Ans – c)

Consumption curve makes an intercept on the Y-axis. It indicates that:

a) Saving is positive when income is zero
b) Consumption is positive when income is zero
c) Saving is negative when income is positive
d) consumption is zero when income is zero

Ans – b)

Relationship of APC and APS with national income can be represented as:

a) Both APC and APS fall with increase in National Income
b) Both APC and APS rise with increase in National Income
c) APS falls, while APC rises with increase in National Income
d) APC falls, while APS rises with increase in National Income

Ans – d)

In the saving Function: S = -100 + 0.6Y, the value of autonomous consumption will be:

a) 0.6
b) -100
c) 0.4
d) 100

Ans – d)

Problem of unemployment is the problem of:

a) Voluntary unemployment
b) Involuntary Employment
c) Involuntary Unemployment
d) Voluntary Employment

Ans – c)

The level of induced consumption in an economy depends on:

a) Level of Nationa Income
b) MPC
c) Both a) and b)
d) Autonomous Consumption

Ans – c)

Which of the following is true about AD in a two sector economy:

a) AD = Consumption + Investment
b) AD curve starts from some point above the origin
c) AD curve has a positive slope
d) All of these

Ans – d)

Which of the following statements is false?

a) At break even point, the value of APC is one
b) The value of marginal propensity to consume is always positive
c) APC can never be greater than one
d) Full employment implies absence of involuntary unemployment

Ans – c)

Which of the following is correct

a) MPC + MPS = 1
b) MPC + MPS > 1
c) MPC – MPS = 1
d) MPC + MPS = 0

Ans – a)

Full employment implies absence of:

a) Unemployment
b) Voluntary Unemployment
c) Involuntary Unemployment
d) None of these

Ans – c)

When consumption function shoots from Y-axis, it indicates that:

a) Consumption is zero when income is zero
b) Saving is zero when income is zero
c) Saving is negative when income is positive
d) Consumption is positive when incoe is zero

Ans – d)

Which of the following is not a component of AD in a two sector economy?

a) Government Expenditure
b) Net Exports
c) Consumption Expenditure
d) Both a) and b)

Ans – d)

Aggregate Consumption in an economy is:

a) Always Positive
b) Always Negative
c) Positive in the beginning and then negative
d) Negative in the beginning and then positive

Ans – a)

MPC = 0, when:

a) Increase in Saving = Increase in Income
b) Entire increase in income is saved
c) Increase in Consumption = Increase in Income
d) Both a) and b)

Ans – d)

The Consumption of an economy is given as C = 40 + 0.80Y, then value of MPS is:

a) 0.80
b) 1.00
c) 0.40
d) 0.20

Ans – d)

Choose the correct statement:

a) Aggregate Demand = Consumption + Investment
b) Aggregate Supply = Consumption + Saving
c) Both a) and b)
d) Neither a) nor b)

Ans – c)

If MPC is 0.6, what will be the change in consumption, if income increases by 100.

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

Ans – c)

Which of the following is correct?

a) APS = Savings/Income
b) MPC = 1 – MPS
c) APC + APS = 1
d) All of these

Ans – d)

When Autonomous Consumption = ₹100 crores, Marginal Propensity to Save = 0.30 and National Income
is ₹1,500 crores, then total consumption will be:

a) ₹1,050 crores
b) ₹1,150 crores
c) ₹550 crores
d) None of these

Ans – b)

If Consumption at zero level of National Income is ₹50 crores, MPC is 0.6 and National Income is
₹1,000 crores, then value of savings will be:

a) ₹650 crore
b) ₹450 crore
c) ₹350 crore
d) None of these

Ans – c)

If MPC is 0.7, then an increase in National Income of ₹1,000 crores will result in additional
savings of:

a) ₹300 crores
b) ₹700 crores
c) ₹7,000 crores
d) None of these

Ans – a)

The consumption Function of an economy is given as: C = 50 + 0.6Y. Which of the following statement
is true for this economy.

a) Consumption at zero level of National Income is ₹50 crores
b) People spend 60% of rise in income on consumption
c) Both a) and b)
d) People save 60% of rise in income

Ans – c)

Suppose in a hypothetical economy, the income rises from ₹500 crores to ₹600 crores. As a result,
the consumption expenditure rises from ₹400 crores to ₹500 crores. Marginal Propensity
to consume in such a case would be _ .

a) 0.8
b) 0.4
c) 1.0
d) 0.6

Ans – c)

If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crore,
the value of savings will be _ .

a) ₹100 crores
b) ₹200 crores
c) ₹800 crores
d) ₹500 crores

Ans – c)

If the vaue of Average Propensity to save (APS) is 0.2 and National Income is ₹4,000 crore, then consumption
will be __ .

a) ₹4,000 crores
b) ₹3,200 crores
c) ₹3,800 crores
d) ₹2,600 crores

Ans – b)

If Autonomous Consumption (C) is greater than Zero, it indicates that the national income of hte
economy will be __ .

a) Rising
b) Falling
c) Zero
d) Constant

Ans – a) or b) or c) or d)