# Class 12 Economics Chapter 10 Determination of Income and Employment MCQ Question with Answers

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## Determination of Income and Employment Class 12 Economics MCQ Questions with Answers

Class 12 Economics MCQ with answers are given here for Chapter 10 Determination of Income and Employment. These MCQs are based on the latest CBSE board syllabus and relate to the latest Class 12 Economics syllabus. By Solving these Class 12 MCQs, you will be able to analyze all of the concepts quickly in the chapter and get ready for the Class 12 Annual exam.

Learn MCQ of Determination of Income and Employment Class 12 PDF with Answers according to the latest CBSE and NCERT syllabus. Students should prepare for the examination by solving the CBSE Determination of Income and Employment Class 12 MCQ with answers given below.

Question 1. Wage cut maintains full employment in the economy.” Who put forward this view?
(a) Pigou
(b) Keynes
(c) Marshall
(d) None of the above

A

Question 2. 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 3. What will be MPC when MPS = 0?
(a) One
(b) Zero
(c) Two
(d) Infinite

A

Question 4. If the marginal propensity to consume is greater than the marginal propensity to save, the value of the multiplier will be:
(a) greater than 2
(b) less than 2
(c) two equal to 2
(d) equal to 5

A

Question 5. Deflationary Gap shows the measurement of:
(a) Deficit Demand
(b) Surplus Demand
(c) Full Employment
(d) None of these

A

Question 6. If MPC is equal to 1, the value of the multiplier is
(a) 0
(b) 1
(c) Between 0 and 1
(d) Infinity

D

Question 7. The ‘difference between the Aggregate Demand at above full employment and Aggregate Demand at full employment is known as :
(a) Inflationary Gap
(b) Deflationary Gap
(c) Both (a) and (b)
(d) None of the above

A

Question 8. APC + APS = ?
(a) ?
(b) 2
(c) 1
(d) 0

B

Question 9. The main component of aggregate demand is :
(a) Individual consumption
(b) Public consumption
(c) Investment
(d) All the above

D

Question 10. Aggregate demand can be increased by:
(a) increasing bank rate
(b) selling govt, securities by RBI
(c) increasing cash reserve ratio
(d) none of these

D

Question 11. On account of injections and withdrawals, equilibrium level of income undergoes :
(a) A shift
(b) No shift
(c) A dispersal
(d) No change

D

Question 12. According to Keynes, investment implies:
(a) Financial Investment
(b) Real Investment
(c) Both (a) and (b)
(d) None of the above

B

Question 13. Which one of the following is the determining factor of Equilibrium Income is Keynesian View point ?
(a) Aggregate Demand
(b) Aggregate Supply
(c) Both (a) and (b)
(d) None of the above

C

Question 14. If MPC = 0.5 and initial investment is 100 Rs crores, the income generation in the economy will be :
(a) 5 crores Rs
(b) 100 crores Rs
(c) 200 crores Rs
(d) 500 crores Rs

C

Question. With increase in investment, MEC :
(a) Rises
(b) Falls
(c) Remains Constant
(d) None of these

B

Question 15. Which is the determining factor for investment ?
(a) Marginal Efficiency of Capital
(b) Interest Rate
(c) Both (a) and (b)
(d) None of these

C

Question 16. The relation between consumption and savings are:
(a) Inverse
(b) Direct
(c) Inverse and direct both
(d) Neither inverse nor direct.

A

Question 17. If MPS is 0.6,what will be ∆S when income increases by Rs.100 ?
(a) Rs. 60
(b) Rs. 50
(c) Rs. 40
(d) Rs.70

A

Question 18. Classical theory is based on the assumption of:
(a) Say’s law of market
(b) Flexibility in wage rates
(c) Flexibility in interest rate
(d) All of the above.

D

Question 19. Which is the measure of correcting excess demand?
(a) Deficit financing
(b) Reduction in taxes
(c) Increase in public expenditure
(d) Increase in public debt

D

Question 20. Supply creates its own Demand. Who gave this law ?
(a) J.B.Say
(b) J.S.Mill
(c) Keynes
(d) Ricardo

A

Question 21. On which concept does classical viewpoint depend ?
(a) Say’s law of Market
(b) perfect Flexibility of Wage Rate
(c) Perfect Flexibility of Interest Rate
(d) All of these

D

Question 22. Which monetary measure is to be adopted in correcting Inflationary
(a) Increase in Bank Rate
(b) Selling of Securities in Open Market
(c) Increase in Cash Reserve Ratio
(d) All the above

D

Question 23. Who is the author of the book ‘General Theory of Employment, Interest, and Money’?
(a) A.C. Pigou
(b) Malthus
(c) J.M. Keynes
(d) Marshall

C

Question 24. Which one of the following is the determining factor of Equilibrium Income is Keynesian View point ?
(a) Aggregate Demand
(b) Aggregate Supply
(c) Both (a) and (b)
(d) None of the above

C

Question 25. Keynes derived Investment Multiplier from Kahn’s :
(a) Income Multiplier
(b) Consumption Multiplier
(c) Employment Multiplier
(d) None of the above

C

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Question 26. Multiplier is —————— related to the MPS.
(a) Negatively
(b) directly
(c) not
(d) rarely

A

Question 27. Which method Central Bank adopts for controlling quantitative of credit ?
(a) Bank Rate
(b) Open Market Operations
(c) Change in Cash Reserve Ratio
(d) All the above

D

Question 28. Who is the writer of the book, “Traited Economic Politique” ?
(a) Pigour
(b) J.B. Say
(c) Keynes
(d) Ricardo

A

Question 29. According to classical economists, real wage rate is ______ to the Marginal Productivity of Labour.
(a) Equal
(b) More
(c) Less
(d) None of these

A

Question 30. Which among is the direct tax?
(a) Income tax
(c) Wealth tax
(d) All of these

D

Question 31. If MPC = 0.5 and initial investment is 100 Rs crores, the income generation in the economy will be :
(a) 5 crores Rs
(b) 100 crores Rs
(c) 200 crores Rs
(d) 500 crores Rs

C

Question 32. Which is the measure of correcting excess demand?
(a) Deficit financing
(b) Reduction in taxes
(c) Increase in public expenditure
(d) Increase in public debt

D

Question 33. When MPS value is 0.25 , the value of investment multiplier will be?
(a) 1.33
(b) 2
(c) 5
(d) 4

D

Question 34. If MPC = 1, the value of the multiplier is:
(a) 0
(b) 1
(c) Between 0 and 1
(d) Infinity

D

Question 35. Supply creates its own Demand. Who gave this law?
(a) J.B.Say
(b) J.S.Mill
(c) Keynes
(d) Ricardo

A

Question 36. Which is the determining factor for investment?
(a) Marginal Efficiency of Capital
(b) Interest Rate
(c) Both (a) and (b)
(d) None of these

Question 37. Which one is correct ?
(a) Y = C + I
(b) Y = 0 = N
(c) C + S = C + I
(d) All of these

D

Question 38. _________ refers to a situation where aggregate demand is equals to aggregate supply and resources are not fully employed in an economy.
(a) Full employment equilibrium
(b) Over full employment equilibrium
(c) Under full employment equilibrium
(d) None of the above

C

C

Question 39. If ratio between MPC and MPS is 4:1, then value of multiplier is:
(a) 3
(b) 4
(c) 5
(d) 6

C

Question 40. With the increase in investment, MEC:
(a) Rises
(b) Falls
(c) Remains Constant
(d) None of these

B

Question 41. ______ is called planned investment.
(a) Ex-ante investment
(b) Ex-post investment
(c) Both (a) and (b)
(d) None of the above

A

Question 42. Which is the determining factor for investment?
(a) Marginal Efficiency of Capital
(b) Interest Rate
(c) Both (a) and (b)
(d) None of these

C

Question 43. If MPS = 0.30, Autonomous Consumption = ₹50 crores and Investment = ₹100 crores, then Equilibrium Income will be:
(a) ₹300 crores
(b) ₹150 crores
(c) ₹500 crores
(d) ₹45 crores

C

Question 44. “Supply creates it own demand”. This statement was given by the economist:
(a) Keynes
(b) Pigou
(c) J. B.Say

C

Question 45. If C = 20 + 0.80 Y and Investment Expenditure is ₹50 crores, then Equilibrium Income is:
(a) ₹350 crores
(b) ₹400 crores
(c) ₹200 crores
(d) ₹100 crores

A

Question 46. Average Propensity to Consume can never be __
(a) positive
(b) zero
(c) more than one
(d) less than one

B

Question 47. According to classical economists, there always exists __ equilibrium in the economy.
(a) Full employment
(b) Underemployment
(c) Over full employment
(d) None of these

A

Question 48. Increase in aggregate demand of equilibrium level of income and employment causes increase in :
(a) Employment
(b) Production
(c) Income
(d) All of these

D

Question 49. If income equilibrium level in the economy is determined at the level before full employment, it is known as the state of:
(a) Deficit Demand
(b) Surplus Demand
(c) Partial Demand
(d) None of these

A

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