CUET Economics - Macro - Income & Employment | Free Questions - Page 7

Q1:

2025: 22 May Shift 1

Macro

>

Income & Employment

Medium

Determination of Income and Employment

When, at a particular price level, the aggregate demand for final goods equals the aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex ante consumption, ex ante investment, government spending etc. The rate of increase in ex ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity, we assume a constant final goods price and constant rate of interest over the short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as the effective demand principle. An increase (decrease) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.

The equilibrium in the final goods or production market reaches when .......

Aggregate demand equals aggregate supply.

Aggregate demand greater than aggregate supply.

Aggregate demand less than aggregate supply.

Aggregate demand and aggregate supply equals zero.

Correct Answer

Option 1

Correct Answer

Explanation

Q2:

2025: 22 May Shift 1

Macro

>

Income & Employment

Medium

Determination of Income and Employment

When, at a particular price level, the aggregate demand for final goods equals the aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex ante consumption, ex ante investment, government spending etc. The rate of increase in ex ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity, we assume a constant final goods price and constant rate of interest over the short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as the effective demand principle. An increase (decrease) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.

Consumption, investment and government spending are the major components of ......?

Aggregate supply.

Aggregate demand.

Final goods.

Multipler.

Correct Answer

Option 2

Correct Answer

Explanation

Q3:

2025: 22 May Shift 1

Macro

>

Income & Employment

Medium

Determination of Income and Employment

When, at a particular price level, the aggregate demand for final goods equals the aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex ante consumption, ex ante investment, government spending etc. The rate of increase in ex ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity, we assume a constant final goods price and constant rate of interest over the short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as the effective demand principle. An increase (decrease) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.

In the short run, to determine the level of aggregate demand for final goods in the economy, what will be the affect on price and rate of interest?

Price will increase and rate of interest will constant.

Price will constant and rate of interest remain constant.

Price will increase and rate of interest will increase.

Price remain constant and rate of interest will increase.

Correct Answer

Option 2

Correct Answer

Explanation

Q4:

2025: 22 May Shift 1

Macro

>

Income & Employment

Medium

Determination of Income and Employment

When, at a particular price level, the aggregate demand for final goods equals the aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex ante consumption, ex ante investment, government spending etc. The rate of increase in ex ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity, we assume a constant final goods price and constant rate of interest over the short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as the effective demand principle. An increase (decrease) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.

Effective demand principle situation occurs when _________

Aggregate supply is only determinant of total output.

Aggregate supply is perfectly inelastic.

Aggregate demand is only determinant of total output.

Aggregate demand and supply determine the total output.

Correct Answer

Option 3

Correct Answer

Explanation

Q5:

2025: 22 May Shift 1

Macro

>

Income & Employment

Medium

Determination of Income and Employment

When, at a particular price level, the aggregate demand for final goods equals the aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex ante consumption, ex ante investment, government spending etc. The rate of increase in ex ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity, we assume a constant final goods price and constant rate of interest over the short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as the effective demand principle. An increase (decrease) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.

A decrease in autonomous spending causes aggregate output of final goods to .................... through the multiplier process.

Increase by small amount.

Decrease by large amount.

Equal increase.

Increase by large amount.

Correct Answer

Option 2

Correct Answer

Explanation

Q6:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

The aggregate demand curve of an economy is parallel to X axis. What will be the value of investment multiplier in this economy?

one.

zero.

infinity.

Between 1 and infinity.

Correct Answer

Option 1

Correct Answer

Explanation

Q7:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

A hypothetical economy tends to save only 25% of its additional income. How much additional income would be generated by it if the investment is increased by 50 crores?

50 crores.

100 crores.

200 crores.

250 crores.

Correct Answer

Option 3

Correct Answer

Explanation

Q8:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

Match List-I with List-II

List-I	List-II
(A) Effective demand	(I) National Income
(B) Say's law of markets	(II) Aggregate demand exceeds aggregate supply at full employment
(C) Inflationary gap	(III) Supply creates its own demand
(D) Aggregate supply	(IV) Aggregate demand at equilibrium level

Choose the correct answer from the options given below:

(A) - (IV), (B) - (III), (C) - (II), (D) - (I)

(A) - (II), (B) - (III), (C) - (IV), (D) - (I)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (I), (B) - (III), (C) - (IV), (D) - (II)

Correct Answer

Option 1

Correct Answer

Explanation

Q9:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

In a hypothetical economy, the consumption function is given as C = 100 + 0.75Y. The autonomous investment in the economy is 200 crores. The equilibrium level of income would be______?

1200 crores

1500 crores

1800 crores

2000 crores

Correct Answer

Option 1

Correct Answer

Explanation

Q10:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

Match List-I with List-II

List-I	List-II
(A) Marginal propensity to save	(I) Slope of consumption function
(B) Marginal propensity to consume	(II) Value is 1 at the break even point of the economy
(C) Investment Multiplier	(III) Reciprocal of marginal propensity to save
(D) Average propensity to consume	(IV) 1- c

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (IV), (B) - (III), (C) - (I), (D) - (II)

(A) - (IV), (B) - (I), (C) - (III), (D) - (II)

Correct Answer

Option 4

Correct Answer

Explanation

Q11:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

At the present level of employment in a hypothetical economy, the aggregate demand is falling short of aggregate supply. What will be the likely change in the level of national income of this economy?

National income is likely to rise.

National income is likely to fall.

The economy is already at equilibrium so there will be no change in national income.

The income initially rises and then falls.

Correct Answer

Option 2

Correct Answer

Explanation

Q12:

2025: 21 May Shift 1

Macro

>

Income & Employment

Medium

In an economy, the consumption curve and saving curve are parallel to each other. What will be the value of investment multiplier in this economy?

1

2

5

infinity

Correct Answer

Option 2

Correct Answer

Explanation

Q13:

2025: 16 May Shift 1

Macro

>

Income & Employment

Medium

If aggregate demand falls after reaching full employment equilibrium, what will be the likely impact on the economy?

Excess Demand in the economy.

Deficient supply in the economy.

economy will come back to equilibrium after sometime.

deficient demand in the economy.

Correct Answer

Option 4

Correct Answer

Explanation

Q14:

2025: 16 May Shift 1

Macro

>

Income & Employment

Medium

At the short run equilibrium of income and employment, __________.

Ex-ante saving = Ex-ante consumption

Ex-ante investment = Ex-ante consumption

Ex-ante saving = Ex-ante investment

Ex-ante saving = Ex-post investment

Correct Answer

Option 3

Correct Answer

Explanation

Q15:

2025: 16 May Shift 1

Macro

>

Income & Employment

Medium

Which of the following are components of aggregate demand?

(A) Autonomous Investment

(B) Autonomous Consumption

(C) Induced investment

(D) Induced consumption

Choose the correct answer from the options given below:

(A), (B) and (D) only

(A), (B) and (C) only

(A), (B), (C) and (D)

(B), (C) and (D) only

Correct Answer

Option 3

Correct Answer

Explanation

Q16:

2025: 16 May Shift 1

Macro

>

Income & Employment

Easy

Match List-I with List-II

List-I	List-II
(A) Average Propensity to Consume	(I) It is the savings per unit of income
(B) Marginal Propensity to Consume	(II) It is the consumption per unit of income
(C) Average Ppropensity to Save	(III) It is the change in savings per unit change in income
(D) Marginal Propensity to Save	(IV) It is the change in consumption per unit change in income.

Choose the correct answer from the options given below:

(A) - (II), (B) - (IV), (C) - (I), (D) - (III)

(A) - (II), (B) - (IV), (C) - (III), (D) - (I)

(A) - (I), (B) - (III), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 1

Correct Answer

Explanation

Q17:

2025: 16 May Shift 1

Macro

>

Income & Employment

Medium

If there is an increase in investment by Rs100 in an economy, MPC = 0.9, choose the correct sequence with reference to the working of the investment multiplier.

(A) Producers increase their planned output further by (0.9)10, the income of the economy goes up by (0.9)10 and consumption demand increases further by (0.9)² 10.

(B) This process goes on, round after round.

(C) Income increases by 100, Consumption expenditure increases by 90 and therefore, aggregate demand goes up by 90.

(D) The total increment in the income will be 1000.

Choose the correct answer from the options given below:

(A), (B), (C), (D)

(B), (A), (C), (D)

(C), (A), (B), (D)

(D), (B), (C), (A)

Correct Answer

Option 3

Correct Answer

Explanation

Q18:

2025: 16 May Shift 1

Macro

>

Income & Employment

Medium

Put the alternatives given below in the sequence in which they occur to reach the equilibrium level of out put given that aggregate demand falls short of aggregate supply.

(A) In this case, the firm has to run down existing inventories, which will lead to a fall in production and hence income.

(B) Stocks will be piling up in the warehouses, causing unintended accumulation of inventories.

(C) Ex- ante demand for final goods falls short of the output of final goods that the producers have planned to produce in a given year.

(D) process continues till Ex- ante demand for final goods equals to ex -ante output of final goods

Choose the correct answer from the options given below:

(D), (B), (A), (C)

(B), (C), (A), (D)

(C), (A), (B), (D)

(C), (B), (A), (D)

Correct Answer

Option 4

Correct Answer

Explanation

Q19:

2025: 16 May Shift 1

Macro

>

Income & Employment

Medium

Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure (A) is Rs 80 crores, and MPC is 0.75.

80 crore

160 crore

320 crore

640 crore

Correct Answer

Option 3

Correct Answer

Explanation

Q20:

2025: 15 May Shift 1

Macro

>

Income & Employment

Hard

Suppose at the initial equilibrium of $Y^*$ , there is an exogenous or autonomous shift in peoples' expenditure pattern – they suddenly become more thrifty.

What will be the sequential effect of the above on the economy?

(A) The sudden decline in MPC will imply a decrease in aggregate consumption spending and hence in aggregate demand.

(B) There emerges an excess supply in the economy, but that would mean a reduction in factor payments in the next round and hence a reduction in income.

(C) There is no change in the total value of savings.

(D) MPS of the economy increases, and hence MPC falls.

Choose the correct answer from the options given below:

(D), (B), (C), (A)

(D), (C), (B), (A)

(D), (A), (B), (C)

(C), (B), (D), (A)

Correct Answer

Option 3

Correct Answer

Explanation

Q21:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

If, in an economy, the minimum level of consumption is 45 and 80% of an increase in income(Y) is consumed, what will be the consumption function of this economy?

45 + 80Y

-45 + 20Y

-45 + 0.80Y

45 + 0.80Y

Correct Answer

Option 4

Correct Answer

Explanation

Q22:

2025: 15 May Shift 1

Macro

>

Income & Employment

Easy

Given the equation of the consumption function as $C = \bar{C} + cY$ , what does $\bar{C}$ donate?

Average propensity to consume.

marginal propensity to consume.

induced consumption

autonomous consumption.

Correct Answer

Option 4

Correct Answer

Explanation

Q23:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

The investment multiplier is equal to which of the following?

Ratio of investment to income.

Ratio of change in investment to change in income

Reciprocal of marginal propensity to save.

Ratio of change in income to change in consumption.

Correct Answer

Option 3

Correct Answer

Explanation

Q24:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

Which of the following statement is true?

MPC can be greater than 1

MPS can be less than 0.

The value of APC rises with increase in income.

The value of the investment multiplier is always greater than 1.

Correct Answer

Option 4

Correct Answer

Explanation

Q25:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

Given that in an economy, consumption function is

C = 80 + 0.80Y and autonomous investment (I) = 120,

Match List-I with List-II

List-I	List-II
(A) Equilibrium level of income	(I) 400
(B) Break-even point	(II) 120
(C) Investment multiplier	(III) 5
(D) Value of savings at equilibrium	(IV) 1000

Choose the correct answer from the options given below:

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (I), (B) - (III), (C) - (IV), (D) - (II)

(A) - (IV), (B) - (I), (C) - (III), (D) - (II)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 3

Correct Answer

Explanation

Q26:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

In the excess demand condition, which of the following measures may be adopted in the economy to control it?

(A) Increase in repo rate.

(B) Decrease in reverse repo rate.

(C) Sale of government securities in the open market.

(D) Increase in subsidies.

Choose the correct answer from the options given below:

(A) and (D) only

(A) and (C) only

(C) and (D) only

(B) and (C) only

Correct Answer

Option 2

Correct Answer

Explanation

Q27:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

Aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. Which of the following is not the assumptions behind this principle?

Price of final goods is constant.

Interest rates are constant.

Aggregate supply is perfectly elastic.

Aggregate demand is perfectly elastic.

Correct Answer

Option 4

Correct Answer

Explanation

Q28:

2025: 15 May Shift 1

Macro

>

Income & Employment

Medium

Identify the correct expression to calculate equilibrium level of income of an economy.

$(\bar{C} + \bar{I})/MPC$

$(\bar{C} + \bar{I})/MPS$

$\bar{C}/MPC$

$\bar{I}/MPS$

Correct Answer

Option 2

Correct Answer

Explanation

Q29:

2025: 14 May Shift 1

Macro

>

Income & Employment

Easy

Match List-I with List-II

List–I	List–II
(A) Marginal propensity to consume	(I) ΔS/ΔY
(B) Marginal propensity to save	(II) ΔC/ΔY
(C) Average propensity to consume	(III) S / Y
(D) Average propensity to save	(IV) C / Y

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (I), (B) - (III), (C) - (II), (D) - (IV)

(A) - (II), (B) - (I), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 3

Correct Answer

Explanation

Q30:

2025: 13 May Shift 2

Macro

>

Income & Employment

Easy

Match List-I with List-II

List-I	List-II
(A) Marginal propensity to consume	(I) Change in savings per unit change in income.
(B) Marginal propensity to save	(II) Savings per unit of income.
(C) Average propensity to consume	(III) Change in consumption per unit change in income.
(D) Average propensity to save	(IV) Consumption per unit of income.

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (III), (B) - (I), (C) - (IV), (D) - (II)

(A) - (I), (B) - (II), (C) - (IV), (D) - (III)

(A) - (III), (B) - (IV), (C) - (I), (D) - (II)

Correct Answer

Option 2

Correct Answer

Explanation

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