Theory of Income and Employment
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This set of Business Economics Multiple Choice Questions & Answers (MCQs) focuses on Theory of Income and Employment
Q1 | “Supply creates its own demand “is a law of:
- investment
- inflation
- consumption
- market
Q2 | According to classical economists, variations in savings are due to:
- level of investment
- rate of interest
- level of employment
- none of the above
Q3 | Supply creates its own demand is the Basis of:
- classical economics
- keynesian economics
- monetarism
- none of these
Q4 | Which policy is effective in the Keynesian range?
- monetary policy
- fiscal policy
- incomes policy
- none of these
Q5 | When output exceeds spending:
- there is unsold output, and level of output will fall
- there is unsold output, and level of output will rise
- there is unsold output, and level of spending will rise
- there is no unsold output since the level of spending will rise
Q6 | Entrepreneurs will have no tendency to expand or contract output and employment when
- ad>as
- ad
- ad=as
- none of the above
Q7 | The slope of the consumption function is called
- mpc
- mps
- apc
- aps
Q8 | The concept of effective demand is associated with the name of
- marshall
- keynes
- krugman
- say
Q9 | Psychological law of consumption states that the value of MPC is lies between zero and
- 1
- 2
- 3
- 4
Q10 | Net investment is also known as
- depreciation
- induced investment
- autonomous investment
- capital formation
Q11 | In the saving function S = -a + (b)Y, the term ‘b’ denotes
- saving
- mpc
- mps
- aps
Q12 | Who propounded Psychological law of consumption
- adam smith
- ricardo
- keynes
- pigou
Q13 | When MPS = 0.2, MPC will be
- 0.8
- 0.2
- 1.2
- 20
Q14 | In the linear consumption function C = a + bY, coefficient ‘a’ denotes
- mpc
- apc
- autonomous consumption
- induced consumption
Q15 | In the equation C = 60 + 0.6 Y, MPC is
- 60
- 0.6
- 1
Q16 | Keynes assumed the presence of --------- economy for the fundamental law ofconsumption
- capitalistic
- socialistic
- planned
- none of the above
Q17 | Demand-pull inflation may be caused by:
- an increase in costs
- a reduction in interest rates
- a reduction in government spending
- an outward shift in aggregate supply
Q18 | Inflation:
- always reduces the cost of living
- always reduces the standard of living
- reduces the price of products
- reduces the purchasing power of a rupee
Q19 | An increase in injections into the economy may lead to:
- an outward shift of aggregate demand and demand-pull inflation
- an outward shift of aggregate demand and cost-push inflation
- an outward shift of aggregate supply and demand-pull inflation
- an outward shift of aggregate supply and cost-push inflation
Q20 | According to the Phillips curve, unemployment will return to the natural rate when:
- nominal wages are equal to expected wages
- real wages are back at long-run equilibrium level
- nominal wages are growing faster than inflation
- inflation is higher than the growth of nominal wages
Q21 | What is the cause of inflation?
- if money supply increases.
- if the production rate falls.
- if money supply increases and production falls.
- both money supply and production decreases.
Q22 | What does the inflation imply?
- rise in budget deficit
- rise in prices of consumer goods.
- rise in money supply.
- rise in general price index.
Q23 | How the inflation can be checked temporarily?
- increase in money supply
- decrease in money supply
- increase in wages
- decrease in tax
Q24 | Which groups are not protected from inflation?
- industrial worker
- agricultural farmers
- government pensioners
- saving bank account holders
Q25 | Which of the following cannot be included among the remedies of inflation?
- better capacity utilization
- by making low bank rate
- by reducing budget deficit
- by making high bank rate