Deck 7: Keynesian Economics and Related Concepts

Question 1

Who postulated the law Supply creates its own demand

A)Keynes
B)J B say
C)Marshall
D)Pigou

Answer 1

J B say

Question 2

Autonomous investment is

A)Income inelastic
B)Instable
C)Interest elastic
D)Income elastic

Answer 2

Income inelastic

Question 3

MEC for a capital good was found out to be 10% and the market rate of interest is 9%, then the investment is

A)Not profitable
B)Profitable
C)Breakeven
D)Cannot say

Answer 3

Profitable

Question 4

In the Keynesian two sector economy, AD>AS, then

A)S=I
B)S>I
C)SD)S=0

Question 5

Value of MPC is

A)>1
B)<1
C)0
D)0? MPC ?1

Question 6

Schedule that expresses relationship between rate of interest and corresponding amount of investment

A)MEI
B)MEC
C)Effective Demand
D)Aggregate Demand

Question 7

Net investment is

A)Value of gross minus subsidies
B)Investment after providing for depreciation
C)Value of gross output before providing for subsidies
D)None of the above

Question 8

MEC is directly related to

A)Prospective yield
B)Supply price
C)Rate of interest
D)All of the above

Question 9

According to Keynes the most important determinant of consumption

A)Rate of interest
B)Saving
C)Income
D)Investment

Question 10

In the Keynesian two sector economy, AD

A)S=I
B)S>I
C)SD)S=0

Question 11

According to Keynes the most important determinant of investment

A)MEC
B)Effective demand
C)Aggregate demand
D)Rate of interest

Question 12

When disposable income rises from Rs 500 to Rs 600 and consumption expenditure changes from Rs 470 to Rs 560, MPC will be equal to

A)900
B)100
C)0.9
D)1

Question 13

In a two sector economy, aggregate demand is equal to

A)C+I
B)C+S
C)S+I
D)All of the above

Question 14

In Keynesian terminology, investment means:

A)Financial investment
B)Real investment
C)Induced investment
D)None of the above

Question 15

Rate of change in savings to change in income:

A)APS
B)APC
C)MPS
D)MPC

Question 16

Keynesian economics is also known as:

A)Supply side economics
B)Monetary economics
C)Rational expectations
D)Depression economics

Question 17

Which of the following can cause shifts in consumption function:

A)Psychological attitude
B)Social practices
C)Business motives
D)Changes in price level

Question 18

APC is determined by the following equation:

A)C/Y
B)S/Y
C)?C/?Y
D)?S/?Y

Question 19

In the Keynesian two sector model, when AD = AS, then:

A)SB)S>I
C)S=I
D)I=0

Question 20

Which of the following is not correct:

A)MPC declines as income increases
B)MPC is positive but less than one
C)MPS is always positive
D)All the above

Question 21

According to Keynes, saving is:

A)Private virtue but not social virtue
B)Private and social virtue
C)Is neither private virtue nor social virtue
D)Is either social virtue or private virtue

Question 22

MEC is inversely related to:

A)Prospective yield
B)Supply price
C)Investment
D)Rate of interest