Determination of Income and Employment

Question 1

Reduction in reverse repo rate causes

Answer 1

Excess demand

Question 2

” According to Keynes, AS may be assumed to be perfectly elastic in an economy where full employment of resources is yet to be achieved. Accordingly, AD becomes the principal determinant of equilibrium level of income.” Please explain!!

Answer 2

Aggregate supply can be assumed to be perfectly elastic in an economy where full employment of resources is yet to be reached means that an economy not at its potential can witness fluctuations in supply due to changes in price . Supply can be altered by decreasing or increasing price . This can happen because there are more resources present that are yet to be exploited . So suppose price rises supply can rise by using those resources . Hence aggregate demand becomes the determinant of equilibrium income . This happens because total income can be calculated by demand in the economy as a whole .

Question 3

With successive increase in income average propensity to save increases or decreases

Answer 3

None of the above

Question 4

According to the psychological law of consumption by keynes

Answer 4

As income increases consumption also increases but at a lesser rate than the increase in income.

Question 5

With more MPS the income generation falls

Answer 5

True

Question 6

The great depression of the world took place in

Answer 6

1930

Question 7

Induced investment is done by

Answer 7

Private sector

Question 8

Selective credit control is a

Answer 8

qualitative measure

Question 9

Saving curve upward sloping

Answer 9

True

Question 10

Which of the following can be negative ABC, APS, MPS or MPC

Answer 10

APS

Question 11

the slope of consumption is measured by..

Answer 11

MPC