Advertisements
Advertisements
Question
State whether the following statements are True or False with reasons:
Increase in consumption expenditure is less than increase in income.
Solution
True, increase in consumption expenditure is less than increase in income.
Explanation:
According to the Keynesian Psychological law of consumption, when there is an increase in income, the consumption expenditure also increases. However, the increase in consumption expenditure is less than the increase in income.
APPEARS IN
RELATED QUESTIONS
Marginal propensity to consume + marginal propensity to save ......................... '
(zero \ one \ less \ more)
Distinguish between marginal propensity to consume and average propensity to consume. Give a numerical example.
Define marginal propensity to consume
Calculate investment expenditure from the following data about an economy which is in equilibrium:
National income = 1000
Marginal propensity to save = 0.25
Autonomous consumption expenditure = 200
An economy is in equilibrium. Calculate Marginal Propensity to Consume :
National income = 1000
Autonomous consumption expenditure = 200
Investment expenditure = 100
An economy is in equilibrium. Find investment expenditure:
National Income =1,000
Autonomous Consumption =100
Marginal propensity to consume =0.8
In an economy an increase in investment by Rs 100 crore led to ‘increase’ in national by Rs 1000 crore. Find marginal propensity to consume.
An economy is in equilibrium. Find marginal propensity to consume :
Autonomous consumption
Expenditure = 100
Investment expenditure = 100
National Income = 2,000
An economy is in equilibrium. Find autonomous consumption expenditure:
National Income =1,600
Investment Expenditure = 300
Marginal Propensity to Consume= 0.8
The value of marginal propensity to consume is 0.6 and initial income in the economy is Rs 100 crores. Prepare a schedule showing Income, Consumption and Saving. Also show the equilibrium level of income by assuming autonomous investment of Rs 80 crores.
Assuming that increase in investment is Rs1000 crore and marginal propensity to consume is 0.9, explain the working of the multiplier.
An economy is in equilibrium. From the following data, calculate the marginal propensity to save:
1) Income = 10,000
2) Autonomous consumption = 500
3) Consumption expenditure = 8,000
Define marginal propensity to save.
An economy is in equilibrium. Calculate national income from the following :
Autonomous consumption = 100
Marginal propensity to save = 0.2
Investment expenditure = 200
Calculate Marginal Propensity to Consume from the following data about an economy
Which is an equilibrium:
National income = 2000
Autonomous Consumption expenditure = 200
Investment expenditure = 100
An economy is in equilibrium. Calculate Marginal Propensity to Save from the following :
National Income = 1,000
Autonomous Consumption = 100
Investment Expenditure = 200
Answer the following question :
Explain the development and non-development expenditures of government .
Give reasons or explain the following statement:
Income which is not saved is consumption.
Match the following Group ‘A’ with Group ‘B’:
| Group ‘A’ | Group ‘B’ | ||
| (a) | Giffen’s goods | (1) | Uses of commodities |
| (b) | Essential commodities | (2) | Keynes |
| (c) | Consumption | (3) | Primary function of bank |
| (d) | Consumption function | (4) | Inferior goods |
| (e) | Accept deposits | (5) | Money lender |
|
|
(6) | Inelastic demand | |
|
|
|
(7) | Luxurious commodities |
|
|
|
(8) | Dr. Marshall |
Distinguish between Average propensity to consume and Marginal propensity to consume.
Give reason or explain the following statement
Demand for necessary goods is inelastic.
Answer the following question.
What is meant by a propensity to consume?
Answer the following question.
What is meant by autonomous consumption? Explain with the help of a diagram.
An economy is in equilibrium. From the following data calculate investment expenditure :
(i) Marginal propensity to consume = 0·9
(ii) Autonomous consumption = 200
(iii) Level of income = 10000
Answer the following question.
In an economy, investment increased by 1,100 and as a result of it income increased by 5,500. Had the marginal propensity to save been 25 percent, what would have been the increase in income?
If in an economy :
Change in initial Investment (∆I) = ₹ 700 crores
Marginal Propensity to Save (MPS) = 0.2
(a) Investment Multiplier (k)
(b) Change in final income (∆Y)
If the income is ₹ 400 crores and consumption is ₹ 250 crores, what will be the APC?
The relation between APC and MPC in Keynes Psychological consumption function is ______.
MPC = MPS = ?
Which or is true?
Complete the following schedule -
| Y | C | APC | MPC |
| 100 | 90 | ? | ? |
| 120 | 108 | ? | ? |
______ buy goods and services for consumption and also supply factors of production.
Which of the following points are related with marginal propensity to consume?
What is "MPS" or the 'marginal propensity' to save?
Why public goods must be provided by the government?
Identify the correct pair of from the following Columns I and II:
| Columns I | Columns II |
| 1. Total Product increases at an increasing rate and Marginal Product rises till it reaches its maximum point. | (a) Second Stage |
| 2. Total product increases at a decreasing rate and reaches maximum, and MP becomes zero. | (b) First Stage |
| 3. Total product also decreases and marginal product (MP) becomes negative. | (c) Third Stage |
| 4. Improvement in technique of production and discovery of fixed factor substitute can postpone the operation of law for some time. | (d) Fourth Stage |
If the value of Average Propensity to Save (APS) is 0.2 and National Income is ₹4,000 crores, then consumption will be ______
If MPS = 0, the value of multiplier will be ______
When we add up utility derived from consumption of all the units of the commodities, we get:
If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crores, the value of savings will be ______.
The marginal physical product of a factor must be ______ when the total physical product is falling.
Identify the correctly matched pair from Column A to that of Column B:
| Column A | Column B | ||
| (1) | MPC | (a) | Ratio of Savings to Consumption |
| (2) | APC | (b) | Ratio of Consumption to Income |
| (3) | APS | (c) | Ratio of Consumption to Savings |
| (4) | MPS | (d) | Ratio of Savings to Investment |
Income rises from ₹50,000 to ₹60,000, consumption increases from ₹40,000 to ₹48,000. In this situation, what will be the value of Marginal Propensity to Consume (MPC)?
Identify the correctly matched pair from Column A to column B:
| Column A | Column B |
| (1) MPC = 0 | (a) K > 1 |
| (2) MPC = 1 | (b) K = Infinity |
| (3) MPC < 1 | (c) K = 0 |
| (4) MPC > MPS | (d) K < 1 |
If in an economy, the value of investment multiplier is 4 and Autonomous Consumption is ₹ 30 Crore, the relevant consumption function would be :
'Consumption function curve of an involuntary unemployed workers start from some positive level on Y-axis even at zero level of Income'. Justify the given statement.
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.
The value of ______ can be greater than one.
For a hypothetical economy, the government incurs an investment expenditure of ₹ 1,000 crore. If the value of Marginal Propensity to Save (MPS) falls from 0.25 to 0.10. Calculate the value of increase in income due to change in the value of Marginal Propensity to Save (MPS).
Complete the following table:
| INCOME (Y) |
SAVING (S) |
APC |
| 0 | (-) 12 | |
| 20 | 6 |
When National Income rises from ₹ 600 Cr. to ₹ 1000 Cr., the consumption expenditure increases from ₹ 500 Cr. to ₹ 800 Cr. Calculate MPC and hence the value of Investment Multiplier.
