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B Com Exam  >  B Com Test  >  Macro Economics  >  Test: The Keynesian Consumption Function - 2 - B Com MCQ

The Keynesian Consumption Function - 2 - Free MCQ Practice Test with solutions,


MCQ Practice Test & Solutions: Test: The Keynesian Consumption Function - 2 (10 Questions)

You can prepare effectively for B Com Macro Economics with this dedicated MCQ Practice Test (available with solutions) on the important topic of "Test: The Keynesian Consumption Function - 2". These 10 questions have been designed by the experts with the latest curriculum of B Com 2026, to help you master the concept.

Test Highlights:

  • - Format: Multiple Choice Questions (MCQ)
  • - Duration: 10 minutes
  • - Number of Questions: 10

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Test: The Keynesian Consumption Function - 2 - Question 1
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What is the primary factor that determines consumption according to Keynes's theory?

Detailed Solution: Question 1

According to Keynes's theory of consumption, the primary factor that determines consumption is the current level of income. Keynes emphasized that the absolute size of current income is the key determinant of consumption.

Test: The Keynesian Consumption Function - 2 - Question 2
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What is the relationship between marginal propensity to consume (MPC) and income in Keynes's theory?

Detailed Solution: Question 2

Keynes's theory states that the marginal propensity to consume (MPC) is less than one but greater than zero. As income increases, consumption increases, but not by as much as the increase in income. Therefore, the MPC decreases with higher income levels.

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Test: The Keynesian Consumption Function - 2 - Question 3
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What effect does an increase in the general price level have on the consumption function, according to Keynes?

Detailed Solution: Question 3

An increase in the general price level reduces the real value (purchasing power) of money and financial assets, leading to a decrease in consumption. This downward shift in the consumption function is known as the real balance effect.

Test: The Keynesian Consumption Function - 2 - Question 4
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In the Keynesian consumption function, what does the parameter 'a' represent?

Detailed Solution: Question 4

In the Keynesian consumption function, 'a' represents the intercept term or autonomous consumption, which is the amount of consumption expenditure at zero level of income.

Test: The Keynesian Consumption Function - 2 - Question 5
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Which of the following factors does NOT influence the consumption function, according to Keynes?

Detailed Solution: Question 5

Average propensity to save (APS) is not mentioned as an influencing factor in Keynes's description of the determinants of the consumption function. However, average propensity to consume (APC) is discussed.

Test: The Keynesian Consumption Function - 2 - Question 6
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What is the psychological law of consumption proposed by Keynes?

Detailed Solution: Question 6

Keynes proposed the psychological law of consumption, which states that as income increases, consumption increases, but not by as much as the increase in income. This is reflected in the concept of marginal propensity to consume (MPC) being less than one.

Test: The Keynesian Consumption Function - 2 - Question 7
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How does a rise in interest rates generally affect consumption?

Detailed Solution: Question 7

Generally, a rise in interest rates induces people to save more and reduce their consumption. Therefore, higher interest rates tend to decrease consumption.

Test: The Keynesian Consumption Function - 2 - Question 8
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Which factor does NOT influence the propensity to consume of a community, according to Keynes?

Detailed Solution: Question 8

Fiscal policy influences the propensity to consume through taxation and government spending. However, it is not explicitly mentioned as one of the factors that directly influence the propensity to consume according to Keynes.

Test: The Keynesian Consumption Function - 2 - Question 9
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What does the consumption function puzzle refer to?

Detailed Solution: Question 9

The consumption function puzzle refers to the contradiction between Keynes's consumption theory and empirical findings, specifically the conflict between Keynes's theory and Kuznets's long-term time series data.

Test: The Keynesian Consumption Function - 2 - Question 10
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Which of the following is NOT an important feature of Keynes's consumption function?

Detailed Solution: Question 10

Keynes's theory states that the marginal propensity to consume (MPC) is less than one but greater than zero. This answer choice incorrectly states that MPC is greater than one.

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About this B Com Practice Test

This test contains 10 MCQs on The Keynesian Consumption Function - 2 with detailed solutions for each question. It is part of the Macro Economics course on EduRev, designed to align with the current B Com syllabus. Each solution explains not just the correct answer but also gives you an understanding of the topic — not just to attempt the question but also help you prepare for the exam with practice.

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