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#### Consumption and Investment Functions Model Question Paper

12th Standard EM

Reg.No. :
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Economics

Time : 02:00:00 Hrs
Total Marks : 50
6 x 1 = 6
1. The average propensity to consume is measured by

(a)

C/Y

(b)

CxY

(c)

Y/C

(d)

C+Y

2. If the Keynesian consumption function is C=10+0.8 Y then, and disposable income is Rs.100, what is the average propensity to consume?

(a)

Rs.0.8

(b)

Rs.800

(c)

Rs.810

(d)

Rs.0.9

3. Lower interest rates are likely to :

(a)

Decrease in consumption

(b)

increase cost of borrowing

(c)

Encourage saving

(d)

increase borrowing and spending

4. The sum of the MPC and MPS is___________

(a)

1

(b)

2

(c)

0.1

(d)

1.1

5. As income increases, consumption will______

(a)

fall

(b)

not change

(c)

fluctuate

(d)

increase

6. According to Keynes, investment is a function of the MEC and _________

(a)

Demand

(b)

Supply

(c)

Income

(d)

Rate of interest

7. 5 x 1 = 5
8. APS

9. (1)

Average propensity to consume

10. MPS

11. (2)

S/Y

12. APC

13. (3)

f(r)

14. I

15. (4)

ΔS/ΔY

16. Induced Investment

17. (5)

Profit motive

1 x 2 = 2
18. Assertion (A) : Keynes propounded the fundamental psychological Law of Consumption.
Reason (R) : The people to spend on consumption less than the full increment of income.
(a) Both A and R are true and R is not the correct explanation of A
(b) Both A and R are true and R is the correct explanation of A
(c) R is true but A is false
(d) A is true but R is false

19. 2 x 2 = 4
20. The Accelerator Principle
(a) β = $\frac{ΔI}{ΔC}$
(b) Ratio between induced investment and an initial change in consumption.
(c) Further developed by Hicks Samuelson and Harrod.
(d) First introduced by - J.M. Keynes

21. Subjective factors of consumption function
(a) The motive of precaution
(b) Income distribution
(c) Foresight
(d) The motive of pride

22. 2 x 2 = 4
23.  (a) Accelerator model J.M.Clark (b) Multiplier was developed by R.F.Khan (c) MEC Duesenberry (d) Investment Multiplier J.M. Keynes
24.  (a) Multiplier (K) ΔI/ΔY (b) MPS ΔS/ΔY (c) Accelerator (β) ΔI/ΔC (d) APC C/Y
25. 5 x 2 = 10
26. What is consumption function?

27. Define average propensity to consume (APC).

28. What do you mean by propensity to save?

29. Define Marginal Propensity to Save (MPS).

30. Define Accelerator

31. 3 x 3 = 9
32. State the propositions of Keynes’s Psychological Law of Consumption

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

34. Specify the limitations of the multiplier.

35. 2 x 5 = 10
36. Explain Keynes psychological law of consumption f.unction with diagram.

37. What are the differences between MEC and MEI.