MCQs - Concepts of AD & AS and related aggregates | Crash Course of Macro Economics -Class 12 - Commerce PDF Download

Q.1 Consumption function is the functional relationship between _____ and_____

(a) AD and AS

(b) Consumption and AD 

(c) Consumption, National income
(d) National income and personal a income
Ans: C

Q.2 Classical theory of employment is based on the assumption of

(a) Short run

(b) Full employment
(c) Closed economy
d) Fixed price
Ans: B

Q.3 Choose the correct alternative

(a) AD curve has a positive slope

(b) AD curve originates from point of origin and has a positive slope

(c) According to Keynes, investment increases with increases in income

(d) Consumption is zero at zero level of income
Ans: A

Q.4 45° line in the context of equilibrium income is a 

(a)  Line of reference
(b) Line of identity    

(c) Line of equality between AD and AS

(d) Both (a) and (c)

Ans: D

Q.5  Aggregate Demand curve:

(a) Is a diagrammatic presentation of Aggregate Demand schedule.

(b) Shows desired expenditure corresponding to different levels of income in the economy.

(c) Indicates ex-post demand in the economy.

(d) Both (a) and (b)

Ans: D

Q.6 Consumption in Keynesian Economics depends upon 

(a) Income

(b) Saving

(c) Investment

(d) None of these

Ans: A

Q.7 Constant slope of saving curve indicates that:

(a) Saving curve will be a straight line

(b) Saving function will be non linear.

(c) Saving function will be linear.
(d) Both (a) and (c)

Ans: D

Q.8 Out of the following which value can be greater than one ?

(a) APC
(b) MPC
(c) APS

(d) MPS
Ans: A

Q.9 Break-even point is achieved when:

(a) National Income = Consumption
(b) Consumption = Saving

(c) Consumption = Investment
(d) National Income > Consumption
Ans: A

Q.10 Which of the following fact is correct about MPC ?
(a) Value of MPC varies between O and 1

(b) MPC of poor is more than that of rich

(c) MPC falls with successive increase in income

(d) All of these

Ans: D

Q.11 Break-even point occurs when:

(a) Y = S
(b) S = 0

(c) Y = C
(d) both (b) and (c)

Ans: D

Q.12 AD Curve starts :

(a) From the origin
(b) Point Below the origin
(c) Point above the origin
(d) None of these

Ans: C

Q.13 If investment falls to zero, national income does not fall to zero because of

(a) Autonomous Consumption

(b) Induced investment  

(c) Autonomous Investment

(d) Multiplier

Ans: A

Q.14 45° line in the context of equilibrium GDP is a 

(a) Line of reference
(b) Line of identity
(c) Line of equality between AS and AD
(d) Both (a) & (c)

Ans: D

Q.15 AD is:

(a) Positively related to Y
(b) Negatively related to Y 

(c) Not related to Y

(d) Always equal to Y
Ans: A

Q.16 AD curve:

(a) Is a diagrammatic presentation of AD schedule

(b) Shows desired expenditure corresponding to different levels of income in the economy

(c) Indicates ex-post demand in the economy

(d) Both (a) and (b)

Ans: D

Q.17 The slope of S-line is indicated by:

(a) MPC

(b) MPS

(c) 1 - MPC

(d) both (b) and (c)
Ans: D

Q.18 Frictional unemployment occurs due to:

(a) immobility of labour
(b) lack of production capacity

(c) low wage rate

(d) none of these
Ans: A

Q.19 Structural unemployment occurs due to:

(a) change in technology
(b) when factors (other than labour) are in shortage 

(c) both (a) and (b)
(d) none of these
Ans: C

Q.20 Natural unemployment occurs due to:

(a) shortage of factors of production

(b) time required in adjusting to change in technology 

(c) time required in shifting from one job to the other

(d) both (b) and (c)
Ans: D

Q.21 Which of the following does not lead to fall in AD ?

(a) Fall in private consumption expenditure
(b) Fall in exports

(c) Fall in import
(d) Fall in government expenditure
Ans: C

Q.22 Out of the following which value can be greater than one ? 

(a) APC
(b) MPC
(c) APS
(d) MPS
Ans: A

Q.23 At the break-even point: 

(a) Consumption curve lies above the 45o line

(b) Consumption curve lies below the 45o line

(c) Consumption curve intersects 45o line
(d) None of these
Ans: C

Q.24 Which of the following statements is not true for consumption function:

(a) Consumption expenditure is never zero even if income level is zero.

(b) Consumption expenditure increases with increase in income.

(c) Consumption expenditure can increase in a greater proportion as compared to increase in income level.
(d) None of the above
Ans: C