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12th Economics Monthly Test - 1 ( Consumption and Investment Functions )

St. Britto Hr. Sec. School - Madurai

12th Economics Monthly Test - 1 ( Consumption and Investment Functions )-Aug 2020

Time : 1.30 Hours

Part - A

Multiple Choice Question - Answer All Question

Who is the proponent of the following statement? “Consumption is influenced by demonstration effect. The consumption standards of low income groups are influenced by the consumption standards of high income groups”

J.R. Hicks
J. B. Say
Duesenberry
J.M. Keynes

Assertion (A): Consumption is influenced by demonstration effect.
The consumption standards of low income groups are influenced by the consumption standards of high income groups.

Both A and R are true and R is the correct explanation of A.
Both A and R are true but R is not the correct explanation of A
A is true but R is false.
A is false but R is true.

The marginal propensity save _________________

ΔC/ΔY
ΔS/ΔY
ΔP/ΔQ
C/Y*ΔP/ΔQ

If the MPS is 0.5, the multiplier is ______________

0.2
1
0.5
2

The expected rate 'of profit technically means __________

Marginal efficiency of capital
Aggregate Demand
The principle of effective demand
Consumption function

K=1/MPS= ____________

\(\frac{ΔP}{ΔQ}\)
\(\frac{C}{4}\times\frac{ΔP}{ΔQ}\)
Value of multiplier
Value of accelerator

What is relevant in the context of MEC?
I. The prospective yield from a capital asset.
II. The supply price of a capital asset.

I only relevant
II only relevant
Both I and II are relevant
Both are irrelevant

If there is _______ in the consumer goods industry, the accelerator principle would not work.

Full capacity
unused or excess capacity
No capacity
None

Accelerator (β) = _________

C + I
1/1 - MPC
\(\frac{ΔC}{ΔC}\)
ΔC/ΔY

As the value of MPC increases, the value of multiplie

Decreases
Increases
Constant
Cannot say

Part - B

Generic 2 - Answer All Question

List out the assumption of psychological Law of Consumption.
Explain how the following two equations can both be true: Multiplierk = 1/MPS Multiplier k = 1/1-MPC.

What do you mean by propensity to save?

What do you mean by investment?

What are positive and negative multipliers?

Define Accelerator

Part - C

Generic 3 - Answer All Question

Explain any three short fun factors of MEC.

Explain any three subjective and objective factors influencing the consumption function.

Draw the diagram depicting the Relationship between rate of interest and Investment.

What are the limitations of accelerator.

State Duesenberry hypothesis.
Draw the diagrams for Autonomous investment and induced investment.

Part - D

Generic 5 - Answer All Question

Explain Keynes psychological law of consumption f.unction with diagram.

What are the factors on which MEC depends? Also give details on the factors which influence MEC.

Explain the short and long run factors of MEC.
What are the determinants of investment function?

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