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InterviewSolution
This section includes InterviewSolutions, each offering curated multiple-choice questions to sharpen your knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Measure the level ex-ante aggregate demand when autonomous investment and consumption expenditure(A) is rupee50 crore, and MPS is 0.2 and level of income(Y) is ruppe 4000crores. State whether the economy is in equilibrium or not (cite reason) Hint: The aggregate demand (AD) function is given as AD=A+b(y) Given A=50, b or MPC=1-MPS =1-0.2=0.85 Putting the values A and b in AD function we get AD=50+0.8`xx4000`=3250crores Economy is not at equillibrium as AD of 3250crores is less than Y (or AS) of 4000 crores, |
| Answer» AD= 3250 and the economy is not in equilibrium. | |
| 2. |
In an economy , income increases by 10,000 as a result of a rise in investment expenditure by 1,000. Calculate: (a) Investment Multiplier, (b) Marginal Propensity to Consume. |
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Answer» Correct Answer - (a) Investment Multiplier =10; (b) Marginal Propensity to Consume (MPC) =0.9 (a) Investment Multiplier (k) `("Change in income"(DeltaY))/("Change in Investment"(Deltal))=(10,000)/(1,000)=10` (b) We know, k`=(1)/(1-MPC)` `10=(1)/(1-MPC)` MPC`=1-0.10=0.9` |
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| 3. |
If marginal propensity to consume is 0.9, what is the value of multiplier ? How much investment is needed, if national increases by Rs. 5,000 crores? |
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Answer» Correct Answer - Multiplier (k) = 10; Increase in investment =Rs.500 crores Multiplier (k) `=(1)/(1-MPC)=(1)/(1-0.90)=(1)/(0.10)=10` We also know: k`("Change in Income"(DeltaY))/("Change in Investment"(Deltal))` `10=(5,000)/("Change in Investment"(Deltal))` Hence, Change in Increase in investment =Rs. 500 crores. |
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| 4. |
In an economy 75 percent of the increase in income is spent on consumption. Investment is increased by Rs.1,000 crores. Calculate: (a) total increase in income , (b) total increase in consumption expenditure. |
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Answer» Correct Answer - Total increase in income =Rs. 4,000 crores; Total increase in Consumption Expenditure = Rs. 3,000 crores Given: MPC `0.75` (as `75%` of increase in income is spent on consumption) Multiplier (k)`=(1)/(1-MPC)=(1)/(1-0.75)=(1)/(0.25)=4` When also know: k`=("Change in Income"(DeltaY))/("Charge in Investmemt"(Deltal))` `4=("Change in Income"(DeltaY))/(1,000)` So. Change in Income `(DeltaY)=Rs.4,000` crores MPC `=("Change in Consumption"(DeltaC))/("Charge in Income"(DeltaY))` `0.75=("Change in Consumption"(DeltaC))/(4,000)` So, Change in Consumption `(DeltaC) = Rs. 3,000` crores |
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| 5. |
Calculate the value of multiplier if the entire increases in income is saved. |
| Answer» Correct Answer - 1 | |
| 6. |
The saving function of an economy is given as, S=-50+0.4. The economy is in equilibrium at the income level of 1500 crores. Calculate (a) Investment at equilibrium income level. (b) Autonomous consumption: (c ) Multiplier. |
| Answer» (a) 550crores (b) 460crores (c ) 100crores | |
| 7. |
Suppose investment in the economy is fixed at Rs.40 crores. The consumption expenditure, at different levels of income , is given in the following schedule: `{:("Income"(Rs."crores"),200,300,400,500,600,700),("Consumption"(Rs."crose"),220,300,380,460,540,620):}` On the basis of the given schedule, answer the following questions: (i) Calculate AD and AS all level of income. (ii) At what level of income will the economy be at equilibrium? (iii)State the level if income where total saving is negative. (iv) Are saving and investment equal at the equilibrium level of income? (v) Calculate MPC and MPS ,when the incme increases from Rs. 400 crores to Rs. 500 crores. (vi) What will be the income level of Rs. 300 crores? |
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Answer» (ii) Equilibrium level of income is Rs. 500 Crores.At this level, AD =AS `= Rs. 500` Crores and Saving= Investment = Rs. 40 Crores. (iii) When the Income is Rs.200 crores, saving is negative (-20crores). (iv) Yes, saving and investment are equal (Rs.40 crores) at the equilibrium level of income. (v) MPC `=("Change in Consumption"(DeltaC))/("Change in Income"(DeltaY))=(460-380)/(500-400)=(80)/(100)` MPC `=0.80,` MPS `=1-MPC` MPS `=1-0.80=0.20` (vi) AD = Rs. 340 crores at an income of Rs. 300 crores. |
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| 8. |
If consumption function for economy is given as: C=120+0.9Y then what is the value of multiplier? |
| Answer» Correct Answer - Multiplier=10 | |
| 9. |
In an economy S= - 50+50Y is the saving function and investment expenditure is ₹ 7000. Calculate : (i) Equilibrium level of income (ii) Consumption expenditure at equilibrium level of national income. |
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Answer» (i) At equilibrium level of income : S =I, I = 7000 , S = -50 + 0.5 Y` `7000- = - 50 +0.5Y` 7050 = 0.5Y Hence, `Y = *=(7050)/(5)xx 10 ₹ 14100` ₹ 14100 is equilibrium level of income. (iii) Consumption expenditure at equilibrium level of national income Y = C+ S, C = Y -S C = 14100-7000 (S=I = 7000) C = ₹ 7100 Hence, Comnsumption expenditure at equilibrium level of national income is ₹ 7100. |
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| 10. |
If saving function for an economy is given as : S `= - 500 + 0.2Y` and investment expenditure is Rs. 100 crores, then determine: ("i) Level of income when saving will become zero, (ii) Level of income when saving is equal to investment . |
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Answer» ("i) Given Saving Function :S `=- 500 +0.2Y` Putting value of S= 0 in the Saving Function , we get: Y`=2,500` Saving is equal to investment at equilibrium level of income. Putting value of S `= 100` in the Saving Function, we get: `100 =- 500 + 0.2Y` Y`= 3,000` Saving will be equal to investment at the equilibrium level of Rs 3,000 crores. |
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| 11. |
If an economy C=500+0.9Y and I=1000 crores, where C=consumption Expenditure, y=National income, I=Investment. Calculate the following, (i) Equilibrium level of income, (ii) Value of Investment Multiplier |
| Answer» (i)15000Crores (ii)10 | |
| 12. |
In an economy C=500 + 0.9Y and I= 1000, Find (i) equilibrium level of income (ii) consumption at equilibrium. |
| Answer» Correct Answer - `15000,14000` | |
| 13. |
From the following information about an economy calculate (i) its equilibrium level of national income. Consumption function, C=200+0.9Y(where C=consumption expenditure and Y =national income) investment expenditureI=3000. |
| Answer» (i) 3200 (ii) 3000crores | |
| 14. |
The saving function of an economy is given as : S `=-40+0.4(Y).` Calculate the total increase in income if investment expenditure increases by Rs. 700 crores. |
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Answer» We know, Saving function is expressed as: S`=-overlinec+ (1-b)`Y. It means, 0.4 indicates (1-b), i.e. MPS . So, MPS`=04.` Multiier (k) `=(1)/(MPS)=(1)/(0.4)=2.5.` We also know: Multiplier (k) `=("Change in Income"(DeltaY))/("Change in Instment"(Deltal))` Given: Increase in Investment expenditure ` (Deltal) = Rs. 700` crores `2.5=("Change in Income"(DeltaY))/(700)` Change in `(DeltaY) = RS. 1,750` crores |
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| 15. |
In an economy, C = 100 + 0.9Y and J= 700. Calculate the following : (i) Equilibrium level of income (ii) Consumption expenditure at equilibrium level of income. |
| Answer» Correct Answer - 80007300 | |
| 16. |
An economy is in equilibrium. Its consumption function C =300+0.8Y where C is consumption expenditure and Y is income and investment is 700. Find national income. |
| Answer» Correct Answer - 5000 | |
| 17. |
In an economy the marginal propensity to consume is 0.75. Investment expenditure in the economy increases by 75crore. Calculate the total increase in national income. |
| Answer» Correct Answer - 300crores | |
| 18. |
In an economy , marginal propensity to consume is 0.75. If investment expenditure is increased by Rs. 500 crores, calculate the total increaes in income and consumption expenditure. |
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Answer» Correct Answer - Total increase in income =Rs.2,000 crores; Total increase in Consumption Expenditure = Rs.1,500 crores Multiplier (k) `=(1)/(1-MPC)=(1)/(1-0.75)=(1)/(0.25)=4` We also : k`=("Change in Income"(DeltaY))/("Change in Investment"(Deltal))` 4`=("Change in Income"(DeltaY))/500` so, Change in Income `(DeltaY)=Rs.2,000` crores MPC`=("Change in Consumption"(DeltaC))/("Change in Income"(Deltal))` 0.75`("Change in Consumption"(DeltaC))/(2,000)` So Change in Consumption `(DeltaC)= Rs. 1,500` crores |
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| 19. |
In an economy, the marginal propensity to consume is 0.8. If investment increases by Rs. 1,000 crores, calculate the total increase in income. |
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Answer» Correct Answer - Total increase income =Rs. 5,000 crores Multiplier (k) `=(1)/(1-MPC))=1/(1-0.80)=1/(0.20)=5` We also know K: `= ("Change in Income"(DeltaY))/("Change in Investment"(Deltal))` Given : Change in Investment `(Deltal)` `=Rs. 1,000 crores` i.e.,5`=("Change in Income"(DeltaY))/1000` so , Change in Income `(DeltaY)` = Rs. 5,000 crores |
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| 20. |
An economy is in equilibrium. Calculate Autonomous Consumption from the following. National Income=1250 Marginal propensity to save=0.2 Investment expenditure =150 |
| Answer» Autonomous Consumption =100. | |
| 21. |
Suppose marginal propensity to consume is 0.8. How much increase in investment is required to increase naitonal income by 2000 crore?Calculate |
| Answer» Increase in investment=400Crore | |
| 22. |
Assuming that increase in investment is Rs.900 crore and marginal propensity to consume is 0.6, explain the working of multiplier. |
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Answer» Given that `Deltal=900` and MPC `=0.6 ,increae in income is in the following sequence: Increase in investment raises income of those who supply investment goods by Rs.900. This is first round. Since MPC `=0.6,` income earners spent Rs. 540 on consumption. This raises income by 540= 900 xx0.6` in the second round. In the Similar way, third round increase in income is `324=540xx0.6.` In this way, income goes on increasing round by with each round increase in income equal to 60 percent of the previous round increase. The total increase in income is: `DeltaY=Deltal(1)/(1-MPC)=900xx(1)/(1-0.6)` `=Rs.2,250` crores. |
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| 23. |
As a result of increase in investment by Rs. 125 crores, national income increase by Rs. 500 crores Calculate marginal propensity to consume. |
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Answer» Correct Answer - Marginal Propensity to Consume (MPC) `=0.75` Multiplier (k)`=("Change in Income"(DeltaY))/("Change in Investment"(Deltal))=(500)/(125)=4` We know, Multiplier (k)`=(1)/(1-MPC)` `4=(1)/(1-MPC)` `1-MPC=(1)/(4)` MPC`=1-0.25=0.75` |
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| 24. |
As a result of increase in investment by Rs.60 crore, national income rises by 240 crore. Calculate Marginal propensity to consume |
| Answer» Correct Answer - 0.75 | |
| 25. |
As a result of increase in investment by 60 crore, national income rises by 240 crore. Calculate marginal propensity to consume. |
| Answer» Correct Answer - 0.75 | |
| 26. |
It is planned to increase national income by 1000 crores. How much increase in investment is required the relevant consumption fucntion: |
| Answer» increase in investment required =4000 crores | |
| 27. |
An economy is in equilibrium. Find investment expenditure. National income = 1000, Autonomous consumption = 100, MPC=0 |
| Answer» Correct Answer - 100 Cr. | |
| 28. |
An economy is in equilibrium. From the following data calculate autonomous consumption. (i) Income = 10,000 (ii) MPS = 0.2 (iii) Investment 1500 |
| Answer» Correct Answer - 500 | |
| 29. |
Calculate MPC and Multiplier (k) from the following data: |
| Answer» MPC=0.80, 0.90 K,5,10. | |
| 30. |
Due to the increase investment, the national increased by 10000 crores, If 20% of additional incomes is saved. Calculate the increase in investment. |
| Answer» Correct Answer - 2000 crore | |
| 31. |
Calculate the equilirbium level of income in the economy if C=500+(0.9)Y , and investment Expenditure=3000 |
| Answer» Equilibrium level of income=35000 | |
| 32. |
In an economy investment increases from 300 to 500. As a result of this, equilibrium level of income increses by 2,000. Calculate the marginal propensity to consume |
| Answer» Marginal Propensity to Consume=0.9 | |
| 33. |
If the consuption function in an economy is C=50+0.75Y` and the autonomous investmenet is 30 crore, calculate the equilibrium level of income. |
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Answer» Rs.320 crore Hint. At equilibrium AD=AS Since AD=C+I, and AS=Income (Y) `therefore Y=C+I Rightarrow Y=(50+.075Y)+30, Find Y` |
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| 34. |
Equilibrium level of income can be determined atA. full employmentB. under full employmentC. over full employmentD. all of these |
| Answer» Correct Answer - D | |
| 35. |
If planned investment fails short of planned saving, then stock of goods tend to pile up Or Investment accumulate when planned saving. |
| Answer» Excess of planned savings (say, 25,000 crore) over planned Investment (say, 20,000 crore) means that expenditure in the economy is less than what producers had expected or it indicates that household are not consuming as much as the firms expected them to. As a result, the stock of goods tends to pile up. | |
| 36. |
In an economy investment incresaes by 600 crores. If marginal propencity to consume is 0.7. What is the increase in total national income? |
| Answer» Correct Answer - 2000crores | |
| 37. |
If the ration of marginal propensity to consume and marginal propensity to save is 4:1, the value of investment multiplier will be 4 |
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Answer» Ration of 4:1 between marginal propensity to consume(MPC) and marginal propensity to save (MPC) signifies `MPC=(4)/(5)` or 0.8 and `MPS=(1)/(4)` or 0.2 Investment Multiplier(k)=`(1)/(MPS) =(1)/(0.2)` =5 |
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| 38. |
An increase of rupee 100crore in investment leads to a rise 500 crores in the national income. |
| Answer» `"Multipler (K)"=("Change in Income")/("Change in Investment")=(500)/(100)=5` | |
| 39. |
In an economy marginal propensity to save is 0.10. How much increases in investment is required so that national income rises by 400 crores? |
| Answer» Correct Answer - 40crores | |
| 40. |
How much additional income will be generated in an economy with an additional investment is rupee 100 crores and when half of increases in income is spent on cosumption? |
| Answer» Correct Answer - 200 crores | |
| 41. |
AD curve is represented by_ curve in the income determination analysis.A. Consumption+ Saving+investmentB. Consumption + SavingC. Saving + InvestmentD. Consumption+Investment |
| Answer» Correct Answer - a | |
| 42. |
The value of multiplier isA. `1/(MPC)`B. `1/(MPS)C. `1/(1-MPS)`D. `1/(MPC-1)` |
| Answer» Correct Answer - option 2: 1/MPS | |
| 43. |
If saviing funciton of an economy is given as, S-=40+0.4(Y), then MPC isA. 1B. 0.4C. 0.6D. None of these |
| Answer» Correct Answer - c | |
| 44. |
The algebracic relationship between multiplier and MPC isA. Multiplier(k)=1+MPCB. Multiplier (k)=1-MPCC. Multiplier (k) = `1/(1-MPC)`D. Multiplier (k) = `1/MPC` |
| Answer» k=1/1-MPCoption3 is the correct answer | |
| 45. |
If increase in investment 125 crores and increase in national incomes is 500 crores, calculate marginal propensity to save. |
| Answer» Correct Answer - 0.25 | |
| 46. |
An increase of investment by 5000 crores leads to increase in naitonal income which is four times more than the increases in investment. Calculate marginal propensity to save. |
| Answer» Correct Answer - 0.2 | |
| 47. |
In an economy, investment increases by 200 crores. As a result the total income increases by 1000 crores. Calculate the MPC. |
| Answer» Correct Answer - 0.8 | |
| 48. |
In an economy C=200+0.75Y is the consumption function where C is consumption expenditure and Y is national income. Investment expenditure is 4000. Calculate equilibrium level of income and consumption expenditure. |
| Answer» Equilibrium level of income=16800 Consumption expenditure=12800 | |
| 49. |
Calcualte the additional investment needed if the equilibrium level of income falls short by Rs. 1,000 crores . It is given that consumption function is given as: C `=120+0.8Y.` |
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Answer» We know, Consumption function is expressed as : C `=overlinec + b(Y).` It means: 0.8 indicates MPC, i.e. MPC `=0.8.` Multiplier (k) `=(1)/(1-MPC)=(1)/(1-0.8)=5` We also know: Multiplier (k) `=("Change in Income"(DeltaY))/("Change in Investment"(Deltal))` Given: Change in Income `(DeltaY) =Rs.1,000` crores `5=(1,000)/("Change in Investment"(Deltal))` Additional Investment Needed `=Rs.200` crores |
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| 50. |
Calculate aggregate demand (AD) aggregate supply (AS) for all levels and the equilivbrium leveul of income from the given schedule, if the investment is fixed at 20crores: |
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Answer» AD:40,45,50,,55,60,70,75,80,85,90, AS:0,10,20,30,40,50,60,70,80,90, Equilibrium level of income=80crores |
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