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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.
| 51. |
Calculate Multiplier when MPC is 4/5 and 1/2 From the calculation, establish the relation between size of Multiplier and size of MPC. When MPC `(4)/(5)` `K=(1)/(1=0.8)=(1)/(0.2)=5` When MPC=`(1)/(2)` `K=(1)/(1-0.5)=2` Observing the same, we may conclude that there exist positive or direct relation between MPC and investment multiplier. Investment multiplier coefficient measures the change in final income with repsect to given change in the change in the initial investment in the economy. It carries direct relation with rate of growth in an economy, i.e. higher the MPC, more change of growth exists in an ecnomy. But, it a two sided sword hence if investment falls in economy the income may also fall. |
| Answer» Multiplier `=(1)/(1-MPC)` | |
| 52. |
In a two-section ecnomy the income and consuption fuction are as follows: ltbrlt `Y = C+1 , C = 40 + 0.75 Y` If the investments are ₹ 60 crose, calculate , (a) Equilbrium level of iccome , (b) level of consuption at equilbrum, (c) Saving at equilibrium . |
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Answer» At equilibrium level AD= AS = National icome (Y) So, AD = Y + C+I Given C= 40 + + 0.75 Y ` Y = (40 + 0.75 Y) + 60` or ` Y - 0.75 Y = 100 or 0.25 Y = 100 or Y =(100)/(0.25)= 400` Equilibrium level of income = ₹ 400 crore. (b) Putting the value of Y = 400 in the consumption function `(= 40 + 0.75Y)` we get `C = 40 + (0.75) (400) = ₹ 340` crore Level of consumption at equilibrum = ₹ 340 crore. (c) Saving (S) = Inome (Y) - Consumption (C) (S) = 400-340 = 60 Level of saving at equilibrium = ₹60 crore. |
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| 53. |
In an economy S=-50+0.5Y is the saving function (where S= saving and Y=national income) (ii) Consumtion expenditure at equilibrium level of national income |
| Answer» Correct Answer - (i) 14000 (ii) 7100 | |
| 54. |
_refers to a situation when AD is equal to AS beyond the full employment level.A. full employment EquilibriumB. Over full Employment EquilibriumC. Under employment EquilibriiumD. None of these |
| Answer» under employment equilibrium refers to a situation when Aggregate demand (AD) is equal to Aggregate supply(AS) beyond the full employment level.So, option3 is the corect answer. | |
| 55. |
From the data given below about an economy, calculate (a) investment expenditure, and (b) Consumtion expenditure (i) Equilibrium level to income -5000 (ii) Autonomous consumption -500 Marginal propensity to consume-0.4 |
| Answer» Correct Answer - (a) 2500 (b) 2500 | |
| 56. |
Find consumption expenditure from the following Autosome consumption=100 Marginal propensity to consume=0.70, National Income=1000 |
| Answer» Correct Answer - 800 | |
| 57. |
C=50+0.5Y is the consumption function where C is Consumption Expenditure and Y is National Income. Investment expenditure is 2,000 in an economy Calculate(i) Equilibrium level of (National) Income, (ii) Consumption expenditure at equilibrium level of national income. |
| Answer» Correct Answer - 4100 (ii) 2100 | |
| 58. |
As a result of increase in investment by 125 crore, national income increases by 500 crore. Calculate MPC |
| Answer» Correct Answer - 0.75 | |
| 59. |
S-=20+0.4Y and C 20+0.6Y will yield be the same investment multiplier. |
| Answer» Ture. In both cases, the investment multiplier will be 2.5 | |
| 60. |
When aggregate demand is greater than aggregate supply, inventories.A. FallB. RiseC. Do not changeD. First fail, then rise |
| Answer» when aggregate demand is more than aggregate supply, inventories will fall as people demand more of it.So, option1 is the correct answer. | |
| 61. |
Explain how the level of effective demand is attained in an economy it. Aggreate Demand is more than the Aggregate Supply |
| Answer» So long as the aggregate demand price is higher than the aggregate supply price, the prospects of getting additional profits are greater when more workers are provided employment. The proceeds expected (revenue) rise more than the proceeds necessary (costs).This process will continue till the aggregate demand price equals the aggregate supply price and the point of effective demand are reached. This point determines the level of employment and output in the economy. The point of effective demand is, however, not necessarily one of full employment but of underemployment equilibrium. | |
| 62. |
Which of the following expression is correct?A. `"multiplier(k)"=("Change in income"(DeltaY))/("Change in investment"(DeltaI))`B. `"multiplier(k)"=(1)/(MPS-1)`C. `"multiplier(k)"=(1)/(MPC)`D. `"multiplier(k)"=("Change in income"(DeltaI))/("Change in investment"(DeltaY)` |
| Answer» Correct Answer - a | |
| 63. |
C= 100 + 0.4Y is the consumption function of an economy where C is consumption expenditure and Y is National Income. Investment expenditure is 1100. Calculate (i) Equilibrium level of National Income (ii) Consumption expenditure at equilibrium level of National Income. |
| Answer» Correct Answer - 2000900 | |
| 64. |
If change in investment is 1000 and MPC is 0.8, then income will change byA. 1250B. 2500C. 5000D. 10000 |
| Answer» Correct Answer - C | |
| 65. |
In a two sector economy, the income and consumtions functions are Y=C+I and C=50+0.80Y. If the investment are 50 crores. Calculate(a) Equilibrium level of income, (b) Level of consumption at equilibrium (C ) Saving at equilibrium |
| Answer» (a) 500 crores (b)450crores (c ) 50crores | |
| 66. |
If MPC=MPS, the value of multiplier is:A. InfinityB. OneC. Equal to MPCD. Two |
| Answer» Correct Answer - a | |
| 67. |
Calculate autonous consumption expenditure from the following data about an economy which is in equ1hbnum : National income = 1200, MPS= 0.20, investment expenditure = 100 |
| Answer» Correct Answer - 140 | |
| 68. |
Calculate consumption expenditure from the following data about an economy which is in equ1libnum : National income=900, MPS= 0.10, investment expenditure=80. |
| Answer» Correct Answer - 10 | |
| 69. |
In an economy, MPS= 0.4. National income increases by 200 crore as a result of change in investment. Calculate the change in investment. |
| Answer» Correct Answer - 80 crore | |
| 70. |
In an economy planned and saving exceeds planned investment. How will the equality between the two be achieved? Explain. |
| Answer» If in an economy planned savings exceeds planned investment , that would result in undesired build-up of unsold stock. Consequently, AD falls short of AS. Due to excess supply resulting from the stock piling of unsold goods, i.e., unintended inventories, the producers will cut down employment and will produce less. National income will fall and as a result planned saving will start Jailing until it becomes equal to planned investment. It is at this point that equilibrium level of income is determined. | |
| 71. |
An economy is in equilibrium. From the following data about an economy calculate autonomous consumption: (i) Income=5000 (ii) Marginal Propensity to save=0.2 (iii) Investment expenditure=800 |
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Answer» Y=C+I `Y=bar(C)+bY+I` `Y=bar(C)+bY+I` `5000=bar(C)100+0.8(5000)+800[MPS=0.2, MPC=0.8]` 5000=bar(C )+4000+800 bar(C )=5000-4800=200 |
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| 72. |
Calculate Marginal Propensity to Consume from the following data about an economy which is in equilibrium National Income=2000 Marginal propensity to save=200 Investment expenditure 100 |
| Answer» Marginal Propensity to Consume=0.50 | |
| 73. |
An economy is in equilibrium. From the following data about an economy investment expenditure. (i) Income=1000 (ii) Marginal propensity to consumption=0.9 (ii) Investment expenditure=100 |
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Answer» Y=C+I `Y=bar(C)+bY+I` `Y=bar(C)+bY+I` `10000=100+9000+I` I=10000-9100 I=900 |
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| 74. |
If marginal propensity to consume is 0.8, how much will be the value of investment multipilier? Calculate |
| Answer» Investment Multiplier=5 | |
| 75. |
An increase in investment by 400 crore leads to increase in national income by 1600 crore. Calculate MPC... |
| Answer» Correct Answer - 0.75 | |
| 76. |
Calculate consumption expenditure in the economy whose equilibrium level of income is 20000 autosomous consumption is 500 and marginal propensity to save is 0.5 |
| Answer» Consumption Expenditure=.10500 | |
| 77. |
In an economy investment increased by 1,100 and as result of it, income increased by 5500. Had the marginal propensity to save been 25 percent, what would have been the increase in income? |
| Answer» Increase in income=4400 | |
| 78. |
If MPC is 0.6 the investment multiplier will be:A. 1.67B. 2.5C. 6D. 4 |
| Answer» Correct Answer - option 2 | |
| 79. |
Multiplier is_ related to MPCA. directlyB. NotC. IndirectlyD. Rarely |
| Answer» Since, k=1/1-MPCAs, the value of MPC rises, the value of investment multiplier(k) will also increase. This implies , multiplier is directly related to MPC.So, option1 is the correct answer. | |
| 80. |
If C=20+0.80Y and Investment Expenditures is 50 crores, then Equilibrium income isA. 400croresB. 225croresC. 200croresD. 100crores |
| Answer» Correct Answer - option 3 | |
| 81. |
If MPS=0.20. and investment is increased by 400 crores, the total increases in income will be:A. 80croresB. 2000croresC. 500croresD. 3200crores |
| Answer» Correct Answer - b | |
| 82. |
The maximum value of multiplier is_ when the value of MPC is_A. infinity,zeroB. infinity,oneC. one,infinityD. None of these |
| Answer» Consider the following equation;k=1/1-MPC(where k is investment multiplier and MPC is Marginal propensity to consume.)the value of multiplier will be maximum when the value of MPC is maximum because there exists a positive relationship between the two.So, when MPC=1 , the value of multiplier will be infinity.so, option 2 is the correct one. | |
| 83. |
When planned saving is less than planned investment, then,A. National income is likely to fallB. There will be no change in National incomeC. National income is likely to riseD. |
| Answer» then AD (or consumption expenditure) is more than AS. Production will have to be increased to meet the excess demand.Consequently, national income will increase .So, option4 is the correct answer. | |
| 84. |
When planned saving is less than planned investment, It indicates a situation when:A. AD`lt`ASB. AD=ASC. AD`gt`ASD. None of these |
| 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.This would result in undesired build-up of unsold stock. Consequently, AD falls short of AS. So, option1 is correct. | |
| 85. |
An economy is is equilibrium. From the following data, calculate the marginal propensity to save National income=10000 Marginal propensity tosave=5000 Autonomous consumption expenditure=8000 |
| Answer» Marginal Propensity to Save=0.25 | |
| 86. |
An economy is in equilibrium. From the following data, calculate investment expenditure. National income=0.9 Marginal propensity tosave=200 Autonomous consumption expenditure=10000 |
| Answer» Investment Expenditure=800 | |
| 87. |
From the following data calculate the equilibrium level of national income. National income=500 Marginal propensity tosave=0.2 Autonomous consumption expenditure=2000 |
| Answer» Equilibrium Level of income=12500 | |
| 88. |
In an economy the autonomous investment is 60 and the marginal propensity to consume If the equilibrium level of income is 400? Then the autosomes consumption is 30. True and False? Justify your answer. |
| Answer» The given value of autonomous consumption incorrect. The correct value is 20 | |
| 89. |
An economy is in equilibrium. Calculate the investement Expenditure from the following: National Income=800 Marginal propensity to save=0.3 Investment expenditure =100 |
| Answer» Investment Expenditure=140 | |
| 90. |
In an economy planned spending is greater than planned output. Explain all the changes that will take place in the economy Or Explain the changes that take place in an economy when aggregate demand is less than aggregate supply. |
| Answer» when at any level of income, if planned savings is more than planned investment It means that aggregate supply is greater than aggregate demand. the stock will start getting accumulated and As a result, the entrepreneurs will not be able to sell their entire output at given prices. The result will be that output will be reduced and for that some workers have to be uemployed which will result in the reduction of national income. | |
| 91. |
If MPS 0.2 how much new investment is required to make the national income rise by 600 cror ? Explain. |
| Answer» Correct Answer - 120 crore | |
| 92. |
Calculate investment expenditure from the following data about an economy which is in equilibrium National income=1000 Marginal propensity tosave=0.25 Autonomous consumption expenditure=200 |
| Answer» Invest expenditure=50 | |
| 93. |
Calculate Marginal Propensity to Consume from the following data about an economy which is in equilibrium National Income=1500 Marginal propensity to save=300 Investment expenditure =300 |
| Answer» Marginal Propensity to Consume=0.6 | |
| 94. |
An economy is in equilibrium. Calculate national income fromt the following: National Income=100 Marginal propensity to save=0.2 Investment expenditure 200 |
| Answer» National income=1500 | |
| 95. |
In an economy, level of income is ₹ 2000 crore and MPC= 0.75. Calculate total income if investment is increased by ₹ 200 crore. |
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Answer» `" "K= (1)/(1-MPC)= (100)/(25)= 4` `" "K=4` `" "K= (Delta Y)/(Delta I) " "or " "4 = (Delta Y )/(200)` `" "K= (DeltY )/(Delta I)" "or " "4= (Delta y )/(200)` `" "Delta Y= ₹ 800` crore `therefore " "` Total income = `Y+Delta Y= 2000+800= ₹ 2800` crores |
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| 96. |
What changes will take place to bring an economy in equilibrium if (i) planned savings are greater than planned investment, (i) planned savings are less than planned investment. Or In an economy planned spending is greater than planned output. Explin all the changes that will take place in he economy. |
| Answer» In an economy if (i) planned saving exceeds planned investment , then that would result in undesired build-up of unsold stock. Consequently, AD falls short of AS. Due to excess supply resulting from be stock piling of unsold goods, i.e., unintended inventories, the producers will cut down employment and will produce less. National income will fall and as a result planned saving will start Jailing until it becomes equal to planned investment. It is at this point that equilibrium level of income is determinedon the other hand ,if (ii)planned savings falls short of planned investment , then AD (or consumption expenditure) is more than AS. Production will have to be increased to meet the excess demand.Consequently, national income will increase leading to rise in saving until saving becomes equal to investment. It is here that equilibrium level of income is established because what the savers intend to save becomes equal to what the investors intend to invest. | |
| 97. |
If MPS is 0.8 and increase in investment in 10000, national income will increase by.A. 5000B. 25000C. 12500D. 100000 |
| Answer» Correct Answer - C | |
| 98. |
Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium National Income=1200 Marginal propensity to save=0.20 Investment expenditure =100 |
| Answer» Autonomous Consumption Expenditure=140 | |
| 99. |
Fromt the following data about an economy, calculate, (a) Equilibrium level of national income, and (b) Total consumption expenditure at equilibrium level of income national income. (i) C=200+0.5Y is the consumption funciton where C is consumption expenditure and Y is national income. (ii) Investment expenditure is 1500 |
| Answer» Correct Answer - (a) 3400 (b) 1900 | |
| 100. |
In an economy investment is increased by Rs. 300 crore. If `MPC=(2)/(3)` calculate increase in National income. |
| Answer» Correct Answer - 900 | |