Tag: income-output determination

Questions Related to income-output determination

Desire means demand.

economics income-output determination public debt public debt main feature of tax

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

False. Demand is a desire to buy commodity backed by the ability to pay and willingness to buy a commodity.

The equilibrium is the state when _________.

economics income-output determination public debt public debt main feature of tax

  1. demand equals supply

  2. demand is more than supply

  3. demand is less than supply

  4. supply is less than demand

Show answer
Correct Option: A
Explanation:

Market equilibrium is a situation where the aggregate demand and supply of a commodity are the same I.e., equal. Equilibrium is achieved at the intersection of aggregate demand aggregate supply and at that level we get the equilibrium price and quantity. 

Market equilibrium of a commodity is determined by ________.

economics income-output determination public debt public debt main feature of tax

  1. balancing of demand and supply position

  2. aggregate demand

  3. aggregate supply

  4. government intervention

Show answer
Correct Option: A
Explanation:

Market equilibrium is a situation where the aggregate demand and supply of a commodity are the same. Equilibrium is achieved at the intersection of aggregate demand aggregate supply and at that level we get the equilibrium price and quantity. 

When demand increases, the demand curve shifts to the left. 

economics income-output determination public debt public debt main feature of tax

  1. True

  2. False

Show answer
Correct Option: B
Explanation:

Demand increases when price remains constant and other factors change.
For example if the income of the consumer increases, his demand will increase as a result the demand curve shifts to the right.
When demand for a good decreases say with the fall in income, the demand curve will shift to the left.

The factors causing deficient demand are:

economics income-output determination public debt public debt main feature of tax

  1. Fall in consumption expenditure

  2. Decrease in private investment

  3. Decrease in government expenditure

  4. All of the above

Show answer
Correct Option: D
Explanation:

Aggregate demand is the total consumption of goods and services as it is not practically possible to count all the goods and services consumed and hence, the total expenditure undertaken by each household for consumption, private investment, expenditure by government on consumption and investments and net exports. Hence, deficient demand can be because of fall in household consumption, decrease in private investment, decrease in government expenditure. 

The relationship between rate of interest and investment demand is ___________.

economics income-output determination public debt public debt main feature of tax

  1. direct

  2. inverse

  3. constant

  4. none of the above

Show answer
Correct Option: B
Explanation:

Marginal efficiency of investment (MEI) refers to the expected rate of return from the allocation of a proportion of income or capital invested in the business. There is a inverse relation between the rate of interest and investment. If the rate of interest is high then people will take less loan from the bank and they will have less money to invest in whereas if rate of interest is low then people will take more loan from the bank to invest in the business. 

Induced consumption expenditure is ___________ in nature.

economics income-output determination public debt public debt main feature of tax

  1. income inelastic

  2. income elastic

  3. either A or B

  4. neither A nor B

Show answer
Correct Option: B
Explanation:

Induced consumption refers to that consumption which occurs on the basis of change in income. It changes when there is some same change in the level of income in the economy. Therefore, it is income elastic as it depends on the level of income in the economy. 

Determinants of aggregate demand is symbolically expressed as _______________.

economics income-output determination public debt public debt main feature of tax

  1. $AD = C+I$

  2. $AD = C+I+G+(X-M)$

  3. $AD = C+I+(X-M)$

  4. None of the above

Show answer
Correct Option: B
Explanation:

Aggregate Demand refers to the desired level of expenditure in the economy during an accounting year. It is what people wish to spend on the purchase of goods and services during an accounting year.

The determinants of aggregate demand is expressed as: 

Aggregate demand= C+I+G+ (X-M) where

C= Consumption expenditure

I= Investment expenditure

G= Government expenditure

(X-M)= Net export.

____________ consumption expenditure refers to the expenditure, which is independent of income.

economics income-output determination public debt public debt main feature of tax

  1. Autonomous

  2. Induced

  3. Aggregate

  4. None of the above

Show answer
Correct Option: A
Explanation:

Autonomous consumption refers to that consumption which occurs when there is no income in the economy. It is the minimum level of consumption that takes place in the economy. It is the consumption expenditure which is not affected by the income in the economy. 

The expected rate of return from an additional unit of capital invested is termed as _____________.

economics income-output determination public debt public debt main feature of tax

  1. Marginal efficiency of capital (MEC)

  2. Marginal efficiency of investment (MEI)

  3. Both A & B

  4. Neither A nor B

Show answer
Correct Option: C
Explanation:

Marginal efficiency of capital (MEC) or Marginal efficiency of investment (MEI) refers to the expected rate of return from the allocation of a proportion of income or capital invested in the business. It is the rate of return which is expected as per the economic behavior of the business since past few years.