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Determination of Income and Employment Hots | Economics Class 12 - Commerce PDF Download
Q.1 Why can the value of MPC be not greater than 1?
Ans. It is because change in consumption can never be greater than change in income.
Q.2 Does an excess of AD over AS always imply a situation of inflationary gap?
Ans. No. Inflationary gap occurs only when AD>AS corresponding to full employment level of employment.
Q.3 What happens if AD>AS prior to full employment level of employment?
Ans. It is a state of disequilibrium in economics. When AD>AS , producers have to cater to demand out of their existing stock of goods , implying that the desired level of stocks will decrease. It implies greater production & therefore there is increase in AS .This process continues till equilibrium is struck between AD and AS.
Q.4 In poor countries like India , people spend a high percentage of their income so that
APC and MPC are high . Yet , value of multiplier is low . Why?
Ans. Working of the multiplier process is based on one fundamental assumption: that there exists, excess capacity in the economy , so that whenever consumption expenditure rises (implying increase in demand ) there is a corresponding increase in production (implying increase in income ) . But poor countries like India, lack in production capacity.
Accordingly, whenever demand increases (in terms of increase in consumption expenditure), there is increasing pressure of demand on the existing output (implying
inflation or rise in prices) rather than the increase in output or income.
Q.5 Show a point on the consumption curve at which APC= 1.
Ans. APC = C/Y =1 is possible if C=Y, i.e. Consumption is equal to Income.
Q.6 In what respect foreign trade will be useful in removing the adverse economic effects of deficient demand?
Ans. Export increases the demand for goods and services produced in the domestic territory and is helpful to reduce deficient demand.
Q.7 What happens in an economy, when credit availability is restricted and credit is made costlier?
Ans. Aggregate demands falls.
The document Determination of Income and Employment Hots | Economics Class 12 - Commerce is a part of the Commerce Course Economics Class 12.
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FAQs on Determination of Income and Employment Hots - Economics Class 12 - Commerce
| 1. What is the definition of income and how is it determined? |  |
Ans. Income refers to the money or earnings that an individual or business receives over a specific period. It can be determined by adding up all sources of revenue, such as wages, salaries, investments, and business profits, and subtracting any expenses or deductions.
| 2. How is employment determined and measured? | |
Ans. Employment is determined and measured by the number of people who are currently working or actively seeking work. It is commonly measured through employment surveys and data collection methods, which provide information on the number of individuals employed, unemployed, or participating in the labor force.
| 3. What are the different types of income? | |
Ans. There are several types of income, including earned income (such as wages and salaries), investment income (such as dividends and capital gains), rental income, and business income. Each type of income may be subject to different tax regulations and reporting requirements.
| 4. How does income affect the economy and overall employment? | |
Ans. Income plays a significant role in the economy as it directly influences consumer spending and overall demand. When people have more income, they are likely to spend more, which can stimulate economic growth and create job opportunities. Conversely, a decrease in income can lead to reduced spending, lower demand, and potential job losses.
| 5. What are some factors that can impact income and employment levels? | |
Ans. Several factors can impact income and employment levels, including changes in government policies, economic conditions, technological advancements, globalization, and industry-specific factors. For example, fluctuations in interest rates, trade agreements, or automation can significantly affect job availability and income levels in certain sectors.
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