ECONOMICS (030)
TEST CODE – MAE78LT
SYLLABUS – CH 7 & 8 OF MACRO ECON
MAX MARKS – 60, TIME – 2 HOURS.
1. 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 origin
c. AD = Consumption + Investment
d. AD Curve has a positive slope.
2. Aggregate supply and _________ are always equal.
a. National Income
b. Aggregate Demand
c. Marginal Propensity to Save
d. Average propensity to Consume
3. The value of ___________ can never be negative, while ___________ can have a value equal to one.
a. APS, APC
b. MPC, APS
c. APC, APS
d. MPS, APC
4. When planned saving is less than planned investment, then:
a. National income is likely to fall
b. National income is likely to rise
c. There will be no change in National Income
d. None of these.
5. Tick the wrong option:
a. APC can be more than 1
b. APC can be equal to 1
c. APC rises with increase in income
d. APC can never be 0
6. When investment multiplier is 1, the value of marginal propensity to consume is ___________?
7. 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.
8. Give the meaning of Aggregate demand.
9. ____________ refers to actual savings in an economy during a year.
10. Consumption function is linear when MPC is _____________________ (Constant/Rising).
11. Which of the following is correct?
a. MPC + MPS = 1
b. MPC + MPS > 1
c. MPC + MPS < 1
d. MPC + MPS = 0
12. If MPC is 0.6, what will be the change in consumption, if income increases by 100?
13. If aggregate demand exceeds aggregate supply, the income rises. State true or false with reason.
14. S = -20 + 0.4Y and C = 20 + 0.6Y will yield the same investment multiplier. State true or false with reason.
15. There is an __________________ relationship between the value of marginal propensity to save and
investment multiplier.
16. ________________ refers to a situation when AD is equal to AS beyond the full employment equilibrium.
17. An increase of Rs 200 crore in investment leads to a rise of Rs 700 crore in the national income, then the
value of multiplier is?
18. Multiplier is _____________ related to MPC.
19. In the 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
20. According to Keynesian theory, the equilibrium level of income in an economy is determined when
______________ = ________________, and _____________ = ________________.
21. Discuss, in brief, the state of full employment equilibrium with the help of a diagram. (3)
22. Distinguish between Voluntary unemployment and involuntary unemployment. (3)
23. Describe the adjustments that may take place in an economy, when ex-ante aggregate demand is greater
than ex-ante aggregate supply. (3)
24. Define APC & MPC. How are they calculated? (3)
25. What is meant by aggregate demand? Explain the various components of aggregate demand with relevance
to a simple economy. (4)
26. Explain the steps taken in derivation of the Consumption Curve from the Saving Curve. Use diagram. (4)
27. Explain the meaning of equilibrium level of Income and Output using the Saving – Investment approach.
Use a diagram (4)
28. Explain ‘Consumption function’ with the help of a schedule and diagram. (4)
29. Explain the working of investment multiplier with the help of a numerical example. (6)
30. Answer the following. (3 * 2 = 6)
a. An economy is in equilibrium. Calculate national income from the following data:
i. Autonomous Consumption = 100
ii. Marginal propensity to save = 0.2
iii. Investment expenditure = 200
b. Calculate the value of MPC, if in an economy, autonomous consumption is 500 crores, ex-ante
investments are Rs 4000 crores and equilibrium level of income of the economy is Rs 18000 crores.
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