Question 1

Value of MPC is&#10;A)>1&#10;B)<1&#10;C)0&#10;D)0? mpc ?1

Accepted Answer

The Marginal Propensity to Consume (MPC) is the proportion of additional income that is spent on consumption. It ranges between 0 and 1, indicating that with additional income, consumption increases but not more than the increase in income itself.

Question 2

Schedule that expressesrelationship between rate of interest and corresponding amount of investment&#10;A)mei&#10;B)mec&#10;C)effective demand&#10;D)aggregate demand

Accepted Answer

The Marginal Efficiency of Investment (MEI) schedule expresses the relationship between the rate of interest and the corresponding amount of investment. It shows how much investment is expected to be undertaken at different interest rates, based on the anticipated rate of return on the investments.

Question 3

MEC is directly related to&#10;A)prospective yield&#10;B)supply price&#10;C)rate of interest&#10;D)all of the above

Accepted Answer

prospective yield&#10;

Question 4

According to Keynes the most important determinant ofconsumption&#10;A)rate of interest&#10;B)saving&#10;C)income&#10;D)investment

Accepted Answer

According to Keynes, the most important determinant of consumption is income. He proposed that as people's income increases, their consumption also increases, but at a slower rate than the increase in income. This relationship is central to Keynesian economics and is described by the consumption function.

Question 5

In the Keynesian two sector economy, ADi&#10;C)s

Accepted Answer

When AD < AS in a Keynesian two-sector economy, it implies that savings (S) are greater than investment (I), because not all output is being purchased, leading to an accumulation of unsold goods and increased savings.

Question 6

In the equation C = 60 + 0.6 Y, MPCis&#10;A)60&#10;B)0.6&#10;C)0&#10;D)1

Accepted Answer

The Marginal Propensity to Consume (MPC) is the change in consumption resulting from a change in income, represented by the coefficient of Y in the consumption function, which is 0.6 in this equation.

Question 7

According to Keynes the most important determinant ofinvestment&#10;A)mec&#10;B)effective demand&#10;C)aggregate demand&#10;D)rate of interest

Accepted Answer

According to Keynes, the most important determinant of investment is the rate of interest. He argued that as the rate of interest falls, investment increases because borrowing costs are lower, making it cheaper for businesses to finance new investments.

Question 8

When disposable income risesfrom Rs 500 to Rs 600 and consumption expenditure changes from Rs 470 to Rs 560, MPC will be equalto&#10;A)900&#10;B)100&#10;C)0.9&#10;D)1

Accepted Answer

The Marginal Propensity to Consume (MPC) is calculated as the change in consumption expenditure divided by the change in disposable income. Here, the change in consumption expenditure is Rs 560 - Rs 470 = Rs 90, and the change in disposable income is Rs 600 - Rs 500 = Rs 100. Therefore, MPC = 90/100 = 0.9.

Question 9

In a two sector economy, aggregate demand is equalto&#10;A)c+i&#10;B)c+s&#10;C)s+i&#10;D)all of the above

Accepted Answer

In a two-sector economy, which consists of households and firms, aggregate demand is represented by consumption (C) plus investment (I), hence the correct answer is C+I.

Question 10

In Keynesian terminology, investment means:&#10;A)financial investment&#10;B)real investment&#10;C)induced investment&#10;D)none of the above

Accepted Answer

Real investment refers to the purchase of new capital goods, such as machinery, equipment, and buildings.

Question 11

Rate of change in savings to change in income:&#10;A)aps&#10;B)apc&#10;C)mps&#10;D)mpc

Accepted Answer

The answer of Rate of change in savings to change...

Question 12

Keynesian economics is also known as:&#10;A)supply side economics&#10;B)monetary economics&#10;C)rational expectations&#10;D)depression economics

Accepted Answer

The answer of Keynesian economics is also known as:&#10;A)supply side...

Question 13

Which of the following can cause shifts in consumption function:&#10;A)psychological attitude&#10;B)social practices&#10;C)business motives&#10;D)changes in price level

Accepted Answer

The answer of Which of the following can cause shifts...

Question 14

APC is determined by the following equation:&#10;A)c/y&#10;B)s/y&#10;C)?c/?y&#10;D)?s/?y

Accepted Answer

The answer of APC is determined by the following equation:&#10;A)c/y&#10;B)s/y&#10;C)?c/?y&#10;D)?s/?y...

Question 15

In the Keynesian two sector model, when AD = AS, then: A)si C)s=i D)i=0

Accepted Answer

The answer of In the Keynesian two sector model, when...

Question 16

Which of the following is not correct:&#10;A)mpc declines as income increases&#10;B)mpc is positive but less than one&#10;C)mps is always positive&#10;D)all the above

Accepted Answer

The answer of Which of the following is not correct:&#10;A)mpc...

Question 17

According to Keynes, saving is:&#10;A)private virtue but not social virtue&#10;B)private and social virtue&#10;C)is neither private virtue nor social virtue&#10;D)is either social virtue or private virtue

Accepted Answer

The answer of According to Keynes, saving is:&#10;A)private virtue but...

Question 18

MEC isinversely related to:&#10;A)prospective yield&#10;B)supply price&#10;C)investment&#10;D)rate of interest

Accepted Answer

The answer of MEC isinversely related to:&#10;A)prospective yield&#10;B)supply price&#10;C)investment&#10;D)rate of...

Question 19

Keynes considered subjective and objective factors:&#10;A)important determinants of consumption&#10;B)unimportant determinants of consumption&#10;C)determinants of investment&#10;D)determinants of business's willingness to pay

Accepted Answer

The answer of Keynes considered subjective and objective factors:&#10;A)important determinants...

Question 20

Keynesian economics is:&#10;A)macro&#10;B)micro&#10;C)both&#10;D)none

Accepted Answer

The answer of Keynesian economics is:&#10;A)macro&#10;B)micro&#10;C)both&#10;D)none...

Question 21

The MEC increases when:&#10;A)capitalstock increases&#10;B)capitalstock decreases&#10;C)capital remains constant&#10;D)none of the above

Accepted Answer

The answer of The MEC increases when:&#10;A)capitalstock increases&#10;B)capitalstock decreases&#10;C)capital remains...

Deck 4: Keynesian Economics and Related Concepts