# 100 MCQs of Income Determination and Multiplier Macroeconomics class 12

Looking for important MCQs of Income determination and Multiplier chapter with answers of Macroeconomics class 12 of CBSE, ISC, and other state Boards.

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## Multiple Choice Questions of Income determination and Multiplier chapter with answers of Macroeconomics class 12

At equilibrium level:

a) Consumption = Investment
b) Aggregate Demand = Aggregate Supply
c) Saving = Investment
d) Consumption = Saving

Ans – b), c)

If MPC is 0.6, the investment multiplier will be:

a) 1.67
b) 2.5
c) 6
d) 4

Ans – b)

The maximum value of multiplier is when the value of MPC is .

a) Infinity, Zero
b) Infinity, One
c) one, infinity
d) None of these

Ans – b)

When planned saving is less than planned investment, it indicates a situation when:

d) None of these

If MPC = MPS, then value of multiplier is:

a) Infinity
b) One
c) Equal to MPC
d) Two

Ans – d)

AD curve is represented by __ curve in the income determination analysis.

a) Consumption + Saving + Investment
b) Consumption + Saving
c) Saving + Investment
d) Consumption + Investment

Ans – d)

Multiplier is __ related to MPC.

a) Directly
b) Positively
c) Indirectly
d) Rarely

Ans – a), b)

When economy decides to save the whole of its additional income, then value of investment
multiplier will be:

a) 1
b) Indeterminate
c) 0
d) Infinity

Ans – a)

__ refers to a situation when AD is equal to AS beyond the full employment level.

a) Full Employment Equilibrium
b) Over Full Employemnt Equilibrium
c) Underemployment Eqauilibrium
d) None of these

Ans – b)

The algebraic relationship between multiplier and MPC is:

a) Multiplier (K) = 1 + MPC
b) Mulitplier (K) = 1 – MPC
c) Multiplier (k) = 1/1 – MPC
d) Multiplier (k) = 1/MPC

Ans – c)

If saving function of an economy is given as: S = -40 + 0.4 (Y), thenf MPC is:

a) 1
b) 0.4
c) 0.6
d) None of these

Ans – c)

The value of multiplier is:

a) 1/MPC
b) 1/MPS
c) 1/1 – MPS
d) 1/1 – MPC

Ans – b), d)

If MPC = 1, the value of multiplier is:

Or

If the entire additional income of an economy is consumed, the value of investment multiplier
will be _ .

a) 0
b) 1
c) Between 0 and 1
d) Infinity

Ans – d)

If MPC = 0, the value of multiplier is:

a) 0
b) 1
c) Between 0 and 1
d) Infinity

Ans – b)

MPC = 0.75 and as a result of Multiplier Effect, National Income increased by ₹300 crores by an

a) ₹400 crores
b) ₹225 crores
c) ₹1,200 crores
d) ₹75 crores

Ans – d)

When aggregate demand is greater than aggregate supply, inventories:

a) Fall
b) Rise
c) Do not change
d) First fall, then rise

Ans – a)

If C = 20 + 0.80 Y and Investment Expenditure is ₹50 crores, then Equilibrium Income is:

a) ₹400 crores
b) ₹350 crores
c) ₹200 crores
d) ₹100 crores

Ans – b)

When Planned Saving is less than Planned Investment, then:

a) National Income is likely to fall
b) There will be nochane in National Income
c) National Income is likely to rise
d) None of these

Ans – c)

If MPS = 0.20 and investment is increased by ₹400 crores, then total increase in income will be:

a) ₹80 crores
b) ₹2,000 crores
c) ₹500 crores
d) ₹3,200 crores

Ans – b)

If MPS = 0.30, Autonomous Consumption = ₹50 crores and Investment = ₹100 crores, then Equilibrium
Income will be:

a) ₹500 crores
b) ₹150 crores
c) ₹300 crores
d) ₹45 crores

Ans – a)

In determination of Equilibrium Level of Income by AD-AS approach, AD curve is represented by:

a) (C+S) Curve
b) (C+I) Curve
c) (S+I) Curve
d) (C+Y) Curve

Ans – b)

If the marginal propensity of consume is greater than marginal propensity to save, the value of the
multiplier will be.

a) greater than 2
b) less than 2
c) equal to 2
d) equal to 5

Ans – a)

If ratio between MPC and MPS is 4:1, then value of multiplier is:

a) 3
b) 4
c) 5
d) 6

Ans – c)

Find autonomous consumption expenditure,if at equilibrium, national income is ₹1,500 crores;
investment expenditure ₹300 crores; Marginal Propensity to Consumer is 0.7.

a) ₹140 crore
b) ₹150 crore
c) ₹100 crore
d) ₹120 crore

Ans – b)

What will be the level of ex-ante aggregate demand when autonomous investment and consumption
expenditure is ₹100 crore and MPS is 0.4 and level of income is ₹4,000 crore.

a) ₹3,250 crore
b) ₹2,500 crore
c) ₹1,700 crore
d) ₹3,500 crore

Ans – b)

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

Ans – d)

What is the value of multiplier, when saving function is represented as: S = -60 + 0.2Y?

a) 2
b) 5
c) 4
d) 1.25

Ans – b)

Keynesian Theory of Employment is based on the assumption of:

a) Short run
b) LOng run
c) Both a) and b)
d) None of these

Ans – a)

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)

Ans – a)

There exists a positive relation between:

a) Investment Multiplier and MPC
b) Investment Multiplier and APS
c) Investment Multiplier and MPS
c) Investment Multiplier and APC

Ans – a)

With increase in National Income by ₹3,000 crores, savings increased by ₹1,200 crores, the value
of multiplier will be:

a) 2 times
b) 2.5 times
c) 4 times
d) 5 times

Ans – b)

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

Ans – b)

When investment increases from ₹500 crores to ₹600 crores, then income increases from ₹1,200
crores to ₹1,600 crores. MPS should be:

a) 0.20
b) 0.40
c) 0.25
d) 0.50

Ans – c)

Which of the following is the determination factor of Equilibrium according to Keynesian view
point?

a) Aggregate Demand
b) Aggregate Supply
c) Both a) and b)
d) None of the above

Ans – c)

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

Ans – d)

If Marginal Propensity to Save (MPS) is 0.25 and initial change in investment is ₹250 crores, then
the final change in income would be _ .

a) ₹1,000 crores
b) ₹1,200 crores
c) ₹500 crores
d) ₹3,500 crores

Ans – a)