# Assertion Reason MCQs of Determination of Income and Employment Macroeconomics Class 12

Looking for Assertion Reason MCQs of Determination of Income and Employment chapter with answers and explanation of Macroeconomics class 12 CBSE, ISC and other state Board.

## Assertion Reason Multiple Choice Questions of Determination of Income and Employment with answers of Macroeconomics class 12

Let’s Practice

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Consumption curve makes an intercept on the Y-axis, some point above the origin.

Reason (R): People need certain basic goods and services to sustain themselves, even if income is zero.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): At the Break-Even point, consumption is equal to National Income.

Reason (R): APC falls continuously with an increase in income as the proportion of income spent on consumption keeps on decreasing.

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

Ans – b)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): There is a positive relationship between saving and income.

Reason (R): Savings are positive even at zero level of National Income.

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

Ans – c)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): The sum of APC and APS is equal to one.

Reason (R): Income is either used for consumption or for saving.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): MPS varies between 0 and infinity.

Reason (R): Incremental income is either spent on consumption or saved for future use.

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

Ans – d)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

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

Ans – b)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Rich people have a lower propensity to consume as compared to poor people.

Reason (R): Consumption can never be zero even if the national income is zero.

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

Ans – b)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Higher the value of MPC, the higher is the value of Investment Multiplier.

Reason (R): Investment Multiplier is directly related to 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) Assertion (A) is False but Reason (R) is True

Ans – c)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): According to Keynesian theory, equilibrium level is always achieved at full employment level.

Reason (R): At full-employment equilibrium, there is no involuntary 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

Ans – d)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): AD curve is represented by (C+I) curve in the income determination analysis.

Reason (R): The determination of equilibrium output is to be studied in the context of the two-sector model (households and firms).

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): In the determination of equilibrium output, only ex-ante saving and ex-ante investment are considered.

Reason (R): Ex-ante saving and ex-ante investment are always equal to each other.

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

Ans – c)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): In the context of equilibrium, desired investment expenditure is assumed to be autonomous.

Reason (R): Autonomous investment is income inelastic.

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

Ans – b)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): During excess demand, there is no change in the level of employment.

Reason (R): At the time of excess demand, there is no involuntary 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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Deficient Demand leads to underemployment equilibrium.

Reason (R): During deficient demand, equilibrium is determined at a level than full-employment equilibrium.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Excess demand does not lead to any increase in the level of output.

Reason (R): Excess demand gives rise to an inflationary gap.

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

Ans – b)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): AD is measured not as the sum total of goods but as the sum total of planned.

Reason (R): It is not possible to add up physical quantities of the goods and services planned to be purchased by the people.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): The value of marginal propensity to consume can be greater than one.

Reason (R): The value of marginal propensity to save can be negative as well.

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

Ans – d)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): The value of the investment multiplier varies between one and infinity.

Reason (R): The minimum value of the investment multiplier is one when MPC equals zero and maximum value equals infinity when MPC equals.

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

Ans – d)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): There is an inverse relationship between the value of investment multiplier and marginal propensity to consume.

Reason (R): Saving is a leakage in the circular flow of income. Greater the savings, greater the leakage and lower the value of investment multiplier.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Full employment does not imply zero unemployment in an economy.

Reason (R): There are certain people in the economy who are both voluntary as well involuntary unemployed and there also exist certain level of natural unemployment 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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): The value of marginal propensity to save can never be negative.

Reason (R): MPS is the ratio between additional savings and additional income which is always positive because of a positive relationship between savings and income.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): AS increases proportionate to the increase in AD as long as there is excess capacity in the economy.

Reason (R): Excess capacity arises because of the deficiency of demand, so that as demand increases, supply increases proportionately.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): During periods of economic downturn, central bank raises cash reserve ratio as a monetary policy tool to stabilise the economy.

Reason (R): This in turn will increase the credit creation power of the commercial banks and thus reduces the level of AD 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

Ans – d)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): Fiscal policy focuses on both the principles of economic growth and stability.

Reason (R): Stability is achieved by correcting the situation of inflationary and deflationary gap, while growth is achieved by way of lower taxation and higher subsidies to the producers.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): During the pandemic, income of the people have fallen and as a result there has been a reduction in aggregate demand.

Reason (R): According to the Keynesian economics, government should follow expansionary fiscal policy implying a higher level of government expenditure and lower level of taxes.

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

Ans – a)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): SLR is increased to correct the situation of deflationary gap.

Reason (R): Higher SLR increases credit creation capacity of commercial banks which in turn increases liquidity in the capital market.

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

Ans – d)

Read the following statements: Assertion (A) and Reason (R). Choose one of the correct alternatives given below:

Assertion (A): During periods of economic depression, economy is caught in a low level equilibrium trap as investment in the private sector tends to slide to its bottom.

Reason (R): The government can break the deadlock of low demand side factors by pumping investment into an economy and there by raising AD till such time the private investment is revived to achieve higher level of output and employment.

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

Ans – a) 