DYNASTY MODERN GURUKUL ACADEMY CHHINKIFARM KHATIMA

N.C. to XII, Affiliated to CBSE New Delhi

MCQS CHAPTER 7,8,9 MACROECONOMICS

Class 12 - Economics
Time Allowed: 1 hour Maximum Marks: 75

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General Instructions:

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All questions are compulsory

1. The important factor influencing the propensity to consume in an economy is: [1]

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a) The level of income b) The level of investment

c) The level of savings d) The level of consumption

2. If the people of an economy consume only a part of the additional income what can you say about the value of [1]
multiplier?

a) k < 1
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b) k = 1

c) k = ∞ d) k > 1
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3. Which of the following expression is correct? [1]
Consumption
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a. APC =
National Income
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Change in Consumption
b. APC =
Change in National Income
c. APC = APS - 1
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National Income
d. APC =
Consumption
sty

a) Option (d) is correct. b) Option (c) is correct.

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c) Option (b) is correct. d) Option (a) is correct.

4. If MPC is less than one, it follows that [1]
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a) (1 - b) i.e. MPS is zero b) (1 - b) i.e. MPS is positive

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c) (1 - b) i.e. MPS is negative d) (1 - b) i.e. MPS is infinity

5. If y = 1000, c = 1000, the APC + APS will be [1]

a) 1 b) 3

c) 4 d) 2
6. S = - a + (1 - b) Y is a [1]

a) Linear function of the level of Savings and b) Algebraic function of the level of Savings
Consumption expenditure and capital expenditure

c) Algebraic function of the level of Savings d) Algebraic function of the level of Savings
and Investment expenditure
7. Can the value of APS be negative? [1]

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 a) False. b) Can’t say

c) Insufficient information d) True.

8. ________ refers to that level of Aggregate Demand, which can be met by the corresponding supply in the [1]
economy. (Fill up the blank with correct alternative)

a) Excess Demand b) Deficient Demand

c) Autonomous Consumption d) Effective demand

9. The important factor influencing the propensity to save in an economy is: [1]

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a) The level of savings b) The level of investment

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c) The level of consumption d) The level of income (Y)
10. If MPC = 0.75, then MPS will be [1]

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a) 2.5 b) 1

c) 0.25 d) 25.5
11. For the given Consumption function, C = 205 + 0·9 Y, the value of investment multiplier would be ________. [1]
(Choose the correct alternative to fill up the blank)

a) 0.09
nGb) 0.9

c) 10.0 d) 9.0
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12. According to the Keynesian theory, the equilibrium level of income in an economy is determined when: [1]
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a) Both Aggregate Demand = Aggregate b) Saving = Investment
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Supply and Saving = Investment

c) Investment Multiplier = APS d) Aggregate Demand = Aggregate Supply

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13. In real world situations, what is the value of investment multiplier? [1]
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a. k = 1
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b. k > 1
c. k < ∞
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d. k = ∞

a) (a) and (c) b) (a) and (d)

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c) (a) and (b) d) (b) and (c)

14. When economy decides to save whole of its additional income, then value of investment multiplier will be [1]

a) Infinity b) Indeterminate

c) 1 d) 0
15. As per Keynesian Economics, The equilibrium level of income is determined at a level where: [1]
i. Aggregate Demand is more than 45° line
ii. Aggregate Demand is less than 45° line
iii. Aggregate Demand-curve intersects 45° line
iv. All of these

a) Option (ii) b) Option (i)

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 c) Option (iii) d) Option (iv)
16. If C = 20 + 0.80 Y and Investment Expenditure is ₹ 50 crores, then Equilibrium Income is: [1]

a) ₹ 200 crores b) ₹ 350 crores

c) ₹ 100 crores d) ₹ 400 crores

17. Which of the following is the determining factor of Equilibrium according to Keynesian view point? [1]

a) Both Aggregate Demand and Aggregate b) Aggregate Demand

Supply

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c) Aggregate Supply d) Investment

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18. The value of the multiplier is determined by the: [1]

a) 1
b) 1

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MP C 1−MP S

c) 1−MP C
1
d) 1

MP S

19. At equilibrium level: [1]

20.
a) Consumption = Saving

c) Aggregate Demand = Saving nG b) Consumption = Investment

d) Saving = Investment
The equilibrium level of output/Income under Keynesian Economics is determined when
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[1]

a) Y = A
¯
+ bY - I b) Y = A
¯
+ bY

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c) Y = A
¯
+ bY d) Y = A
¯
× bY
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21. A situation when AS = AD along with fuller utilisation of resources in the economy is called: [1]
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a) Underemployment Equilibrium b) Full Employment Equilibrium

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c) deflationary gap. d) Over Full Employment Equilibrium

22. If MPC = 1, the value of multiplier is ________. [1]
sty
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a) 0 b) 1

c) Infinity d) Between 0 and 1

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23. Identify the correctly matched pair from Column A to that of Column B: [1]

Column A Column B
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(a) Inflationary Gap (i) Selling of government securities

(b) Deflationary Gap (ii) Increase in Statutory Liquidity Ratio

(c) Effects of Deficient Demand (iii) Rise in production level

(d) Plans to Expand Exports (iv) AD > AS (at full employment level)

a) (c) - (iii) b) (a) - (i)

c) (d) - (iv) d) (b) - (ii)

24. Fiscal policy is maintained by [1]

a) Supreme Court of India b) NITI Aayog

c) Reserve Bank of India d) Government of India

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25. The main cause(s) of deficit demand is/are [1]

a) decrease in investment demand b) Both decrease in money supply

and decrease in investment demand

c) increase in public expenditure d) decrease in money supply

26. Inflationary gap in an economy may exist at a situation when: [1]

a) Aggregate Demand (Expected) ≥ b) Aggregate Demand (Expected) ≤

Aggregate Demand (Full employment) Aggregate Demand (Full employment)

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c) Aggregate Demand (Expected) > Aggregate d) Aggregate Demand (Expected) < Aggregate

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Demand (Full employment) Demand (Full employment)
27. Which of the following statements is not correct with respect to the correction of Deficient Demand? [1]

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a) The Central Bank reduces the CRR and b) Government reduces the taxes.

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SLR.

c) The Government increases its spending. d) The Central Bank increases the bank rate.
28. Inflationary gap: [1]

a) Raises the level of output b) Raises the general price level

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c) Both Raises the level of employment and d) Raises the level of employment
Raises the level of output
29. Deficient Demand indicates: y [1]
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a) Deflationary gap b) Full employments equilibrium

c) Under employment equilibrium d) Both under employment equilibrium and

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deflationary gap
30. Assertion (A): APC is continuously increasing as income increases; and APS is continuously decreasing as [1]
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income increases.
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Reason (R): As income increases, the proportion of income saved increases and the proportion of income
consumed decreases.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
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explanation of A. correct explanation of A.

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c) A is true but R is false. d) A is false but R is true.

31. Read the following statements- Assertion (A) and Reason (R). Choose one of the correct alternatives given [1]
below:
Assertion (A): At the break-even level of income, the value of Average Propensity to Consume (APC) is zero.
Reason (R): Sum of Average Propensity to Consume (APC) and Average Propensity to Save (APS) is always
equal to one.
Alternatives:

a) Both Assertion (A) and Reason (R) are true b) Both Assertion (A) and Reason (R) are true
and Reason (R) is the correct explanation of and Reason (R) is not the correct
Assertion (A). explanation of Assertion (A).

c) Assertion (A) is true, but Reason (R) is d) Assertion (A) is false, but Reason (R) is

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 false. true.
32. Assertion (A): At Break-Even Point, Consumption is equal to National Income. [1]
Reason (R): APC falls continuously with increase in income as proportion of income spent on consumption
keeps on decreasing

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

33. Assertion (A): The level of output determined by the equality of Y and AD necessarily mean the level of output [1]

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at which everyone is employed.
Reason (R): The equilibrium level of output may be greater than the full employment level of output (the
situation of excess demand) or less than the full employment level of output (the situation of deficient demand).

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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the

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explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

34. Assertion (A): Higher-income group has a lower propensity to consume as compared to the lower-income [1]
group.
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Reason (R): Consumption expenditure can never be zero as minimum expenditure to be incurred for survival
even at zero levels of income.

a) Both A and R are true and R is the correcty b) Both A and R are true but R is not the
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explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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35. Assertion (A): If a family's marginal propensity to consume is 0.70, then it will necessarily consume seven- [1]
tenths of its total income.
Reason (R): Average Propensity to Consume represents the ratio of absolute consumption expenditure to the
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corresponding level of income.

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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.
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c) A is true but R is false. d) A is false but R is true.

Dy

36. Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative from those given [1]
below.
Assertion (A): Ex-ante savings and Ex-ante investments are never equal to each other.
Reason (R): At equilibrium level of income, aggregate demand may not be equal to the aggregate supply.

a) Both Assertion (A) and Reason (R) are true b) Both Assertion (A) and Reason (R) are true,
and Reason (R) is the correct explanation of but Reason (R) is not the correct
the Assertion (A). explanation of the Assertion (A).

c) Assertion (A) is true, but Reason (R) is d) Assertion (A) is false, but Reason (R) is
false. true.
37. Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative given below. [1]
Assertion (A): Rich people have lower Marginal Propensity to Consume (MPC) as compared to poor people.

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 Reason (R): Consumption curve makes an intercept on the y-axis at a point above the origin.
Alternatives:

a) Both Assertion (A) and Reason (R) are true b) Both Assertion (A) and Reason (R) are true,
and Reason (R) is the correct explanation of but Reason (R) is not the correct
the Assertion (A). explanation of the Assertion (A).

c) Assertion (A) is true, but Reason (R) is d) Assertion (A) is false, but Reason (R) is
false. true.
38. Assertion (A): The value of APC can be greater than one. [1]

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Reason (R): Consumption is more than National Income before the Break-even Point.

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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

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c) A is true but R is false. d) A is false but R is true.

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39. Assertion (A): There is positive relationship between saving and income. [1]
Reason (R): Savings are positive even at zero level of National Income.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.
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c) A is true but R is false. d) A is false but R is true.
40.
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Assertion (A): The sum of APC and APS is equal to one. [1]
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Reason (R): Income is either used for consumption or for saving.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.
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c) A is true but R is false. d) A is false but R is true.

41. Assertion (A): In Keynesian analysis, the investment curve always lies at the same height above the X-axis. [1]
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Reason (R): We assume that the level of investment demand is the same at every level of income, i.e.,
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autonomous investment, which is independent of income.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
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explanation of A. correct explanation of A.

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c) A is true but R is false. d) A is false but R is true.

42. Assertion (A): APS can never be one or more than one. [1]
Reason (R): APC increases with an increase in income.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

43. Assertion (A): Ex-post Investments represent planned Investments; whereas ex-ante Investments represent [1]
actual level of investments.
Reason (R): At equilibrium level, Ex-ante Savings and Ex-ante Investments are always equal.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

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 c) A is true but R is false. d) A is false but R is true.
44. Assertion (A): Rich people have lower propensity to consume as compared to poor people. [1]
Reason (R): Consumption can never be zero even if national income is zero.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

45. Assertion (A): The value of APC can be greater than one. [1]
Reason (R): It is when total consumption is greater than total income (i.e., C > Y) before break even point, due

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to the existence of autonomous consumption.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

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c) A is true but R is false. d) A is false but R is true.

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46. Assertion (A): The value of marginal propensity to save can never be negative. [1]
Reason (R): MPS = DS

DY
. When income increases (DY is positive), savings also increases (DS is positive); so
MPS is positive. Also, when income decreases (DY is negative), savings also decreases (DS is negative); so
MPS is positive.
ern
a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.
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c) A is true but R is false. d) A is false but R is true.

47. Assertion (A): Higher the value of MPC, higher is the value of Investment multiplier. [1]
Reason (R): Investment Multiplier is directly related to MPC.
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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.
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c) A is true but R is false. d) A is false but R is true.

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48. Assertion (A): Keynes pointed out that during depression, private investment is not induced. [1]
Reason (R): The marginal productivity of capital is high in depression.
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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
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explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

49. Assertion (A): Full employment means zero unemployment. [1]
Reason (R): Natural rate of unemployment always exist in the economy.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

50. Assertion (A): If aggregate demand exceeds aggregate supply, income rises. [1]
Reason (R): Excess of aggregate demand will reduce planned inventory and firms would tend to increase the
employment and output.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the

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 explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

51. Assertion (A): The consumption curve does not start from origin. [1]
Reason (R): There is some minimum level of consumption even at zero level of income, called autonomous
consumption.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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52. Assertion (A): Multiplier explains how many times the income increases as a result of an increase in the [1]
investment.
Reason (R): There is an inverse relationship between the value of marginal propensity to save and investment

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multiplier.

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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

53. Assertion (A): in the context of equilibrium, desired investment expenditure is assumed to be autonomous. [1]
ern
Reason (R): Autonomous investment is income inelastic.

a) Both A and R are true and R is the correct

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explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

54. Assertion (A): Full employment refers to, absence of involuntary unemployment. [1]
ym

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Reason (R): Under full employment situation, all willing and able bodied people get employment at prevailing
wage rate.
ac

a) Both Assertion (A) and Reason (R) are true b) Both Assertion (A) and Reason (R) are true
ast

and Reason (R) is the correct explanation of but Reason (R) is not the correct
Assertion (A). explanation of Assertion (A).
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c) Assertion (A) is true, but Reason (R) is d) Assertion (A) is false, but Reason (R) is
false. true.
Dy

55. Assertion (A): The Government reduces expenditure in order to correct the problem of Excess Demand. [1]
Reason (R): Government expenditure is the type of Fiscal Policy measure used by the government to correct
Excess Demand.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

56. Assertion (A): Ex-post value of total output is always equal to the ex-post aggregate expenditure in the [1]
economy.
Reason (R): Ex-post value of total output (Y) must always be equal to the sum total of ex-post consumption
expenditure (C) and ex-post investment expenditure (I) in the economy.

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 a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

57. Assertion (A): The economy fails to create enough jobs under involuntary unemployment. [1]
Reason (R): Planned output is lower than the full employment level of output.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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58. Read the following statements: Assertion (A) and Reason (R). Choose the correct alternative given below. [1]
Assertion (A): Excess demand does not lead to any increase in the level of real output.
Reason (R): Excess demand creates a gap between actual demand and desired demand corresponding to full

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employment level.

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Alternatives:

a) Both Assertion (A) and Reason (R) are true b) Both Assertion (A) and Reason (R) are true,
and Reason (R) is the correct explanation of but Reason (R) is not the correct
the Assertion (A). explanation of the Assertion (A).
ern
c) Assertion (A) is true, but Reason (R) is d) Assertion (A) is false, but Reason (R) is
false. true.
59. y
Assertion (A): Deficient Demand leads to underemployment equilibrium. [1]
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Reason (R): During deficient demand, equilibrium is determined at a level less than full employment
equilibrium.
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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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ast

60. Assertion (A): The Government increases taxes in order to correct the problem of Excess Demand. [1]
Reason (R): When taxes are increased it reduces the purchasing power of the public, thus reducing the
Aggregate Demand.
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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
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explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

61. Assertion (A): Inflationary pressure takes place when the economy is in full employment. [1]
Reason (R): Due to the rise in demand and rigid supply, the price of the goods tends to rise.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

62. Assertion (A): During excess demand, there is no change in the level of employment. [1]
Reason (R): At the time of excess demand, there is no involuntary unemployment.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the

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 explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

63. Assertion (A): Ex-ante savings and ex-post savings are always equal. [1]
Reason (R): Ex-ante savings are those which all the households plan to make at different levels of income
during a period, whereas ex-post savings are the actual amount of savings made in the economy during a period.

a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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64. Assertion (A): Excess demand does not lead to any increase in the level of output. [1]
Reason (R): Excess demand gives rise to an inflationary gap.

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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

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c) A is true but R is false. d) A is false but R is true.
65. Assertion (A): Excess demand raises the market value of output. [1]
Reason (R): Higher demand than supply leads to decrease in general price level.
ern
a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
explanation of A. correct explanation of A.

c) A is true but R is false.

y d) A is false but R is true.
od

66. Assertion (A): Voluntary unemployment occurs in the economy under deflationary gap. [1]
Reason (R): In the situation of deflationary gap, involuntary unemployment exists.
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a) Both A and R are true and R is the correct b) Both A and R are true but R is not the
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explanation of A. correct explanation of A.

c) A is true but R is false. d) A is false but R is true.

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67. Read the following statements carefully: [1]

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Statement 1: Savings function can be derived from Consumption function.

Statement 2: Consumption curve must always start from the point of origin.
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In light of the given statements, choose the correct alternative from the following:
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a) Both Statements 1 and 2 are true. b) Both Statements 1 and 2 are false.

c) Statement 1 is true and Statement 2 is false. d) Statement 1 is false and Statement 2 is true.
68. Statement I: MPS cannot be negative. [1]
Statement II: The sum of the APC and MPC is always equal to one.

a) Statement I is true, Statement II is false. b) Statement II is true, Statement I is false.

c) Both the statements are false. d) Both the statements are true.
69. Statement 1: Ex-post savings and Ex-post investments are equal at all levels of income. [1]
Statement 2: Under the effective demand principle, the equilibrium output is equal to ex-ante Aggregate
Demand (AD).
In the light of the given statements, choose the correct alternative from the following :

a) Both Statements 1 and 2 are true. b) Both Statements 1 and 2 are false.

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 c) Statement 1 is false and Statement 2 is true. d) Statement 1 is true and Statement 2 is false.
70. Statement I: The consumption curve starts from the negative Y-axis at a distance equal to autonomous [1]
consumption.

Statement II: The 45o line from origin tells us whether consumption is equal to, greater than, or less than
income.

a) Statement II is true, Statement I is false. b) Statement I is true, Statement II is false.

c) Both the statements are false. d) Both the statements are true.

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71. Statement I: In the short-run, we assume that an economy has unused resources - machineries, buildings and [1]

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labours. In such a situation, the law of diminishing returns will not apply; hence additional output can be
produced without increasing marginal cost. Accordingly, price level does not change even if the quantity
produced changes.

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Statement II: If ex-ante demand for final goods falls short of the output of final goods that the producers have

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planned to produce in a given year, there will be unintended accumulation of inventories.

a) Statement I is true, Statement II is false. b) Both the statements are false.

c) Statement II is true, Statement I is false. d) Both the statements are true.

72. Statement 1: When AD is less than AS, planned inventory rises above the desired level. [1]
ern
Statement 2: Effective demand refers to that level of AD which becomes effective because it is equal to AS.

a) Both the Statements are true.

y b) Statement 1 is true and Statement 2 is false.
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c) Statement 2 is true and Statement 1 is false. d) Both the Statements are false.
73. Statement 1: Increase in Reverse Repo Rate helps to correct the excess demand. [1]
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Statement 2: The credit creating power of Commercial Banks can be increased by raising the reverse repo rate.
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a) Statement 1 is true and Statement 2 is false. b) Both the Statements are true.

c) Both the Statements are false. d) Statement 2 is true and Statement 1 is false.
ac
ast

74. Statement 1: To control the situation of excess demand, government tries to reduce level of aggregate [1]
expenditure in the economy by increasing rates of taxes and imposing some new taxes.
Statement 2: During excess demand, the aggregate demand in the economy is more than the full employment
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level of output.
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a) Statement 1 is true and Statement 2 is false. b) Both the Statements are true.

c) Statement 2 is true and Statement 1 is false. d) Both the Statements are false.
75. Statement I: The planned values of the variables are called their ex-post measures; whereas, the actual (or [1]
realised or accounting) values of the variables is called their ex-ante measures.
Statement II: The ex-ante variables (e.g. ex-ante consumption, ex-ante investment, etc.) are the basis of
determination of national income.

a) Both the statements are false. b) Statement I is true, Statement II is false.

c) Both the statements are true. d) Statement II is true, Statement I is false.

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Best of luck