ECONOMICS BY VIKARN

WORKSHEET
INCOME AND DETERMINATION

Worksheet comprises of 3 section – Section -1 having 6, 1 marker question

Section – 2 having 10, three marker question and Section – 3 having 4, Six marker questions.

Time – 2 Hours Marks – 60

SECTION- 1

Q.1    The government can achieve its budget objective of ‘Redistribution of income’ by
_______.
(a) Managing the General Price level in the economy to the desired level.
(b)  Increasing the Gross Domestic Products (GDP) of the economy.
(c)   Bringing the production of goods and services under its direct and absolute control.
(d)  Rationalization of taxes in a pro-poor direction.

Q.2    Assertion (A): Fiscal deficit is greater than budgetary deficit.

Reason (R): Fiscal deficit is the borrowing from the Reserve Bank of India plus other liabilities
of the Government to meet its expenditure.
(a) Both A and R are true and R is the correct explanation of A
(b) Both A and R are true but R is not a correct explanation of A
(c) A is true but R is false
(d) A is false but R is true

Q.3 Disinvestment is a
a) Capital Expenditure b) Revenue Expenditure c) Capital Receipts d) Revenue Receipts

Q.4  If MPC = MPS, then value of multiplier is:

a) Infinity b) One c) Equal to MPC d) Two

Q.5 If MPS = 0.30, Autonomous Consumption = ₹50 crores and Investment = ₹100 crores, then
Equilibrium Income will be:

a) ₹500 crores b) ₹150 crores c) ₹300 crores d) ₹45 crores

Q.6 In case of an underemployment equilibrium, which of the following alternative is not true?
a) Aggregate demand is equal to aggregate supply
b) There exist excess production capacity in the economy
c) Resources are not fully and efficiently utilised
d) Resources are fully and efficiently utilised

SECTION -2
 ECONOMICS BY VIKARN

Q.1 Given that National Income is Rs. 80 crore and consumption expenditure is Rs. 64 crore,
find out Average Propensity to Save. When income rises to Rs. 100 crore and consumption
expenditure to Rs. 78 crore, what will be the Average Propensity to Consume and Marginal
Propensity to Consume?
Q.2 Calculate autonomous consumption expenditure from the following data about an
economy which is in equilibrium
National Income                            = Rs. 500
Marginal Propensity to Save       = 0.30
Investment Expenditure              = Rs. 100
Q.3 Which of the following can have the value of more than 1 and less than 0:
(i) APC (ii) APS (iii) MPC (iv) MPS
State the range of values of above stated concepts.
Q.4 State and discuss the components of aggregate demand in two sector economy?
Q.5 What is meant by repo rate? How does the central bank use this measure to control credit
supply in an economy?
Q.6 State the impact of “excess demand “under Keynesian theory on employment, output and
price in an economy.
Q.7 Are fiscal deficits necessarily inflationary?

Q.8 Distinguish between direct tax and indirect tax?

Q.9 Explain the implications of Revenue deficit?

Q.10 Difference between revenue deficit and Capital receipts?

SECTION -3
Q.1 Giving reasons, state whether the following statements are true or false.

1. When MPC is zero, the value of investment multiplier will also be zero.
2. Value of APS can never be less than zero
3. When MPC>MPS, the value of investment multiplier will be greater than 5.
4. The value of MPS can never be negative
5. When investment multiplier is 1, the value of MPC is zero.
6. The value of APS can never be greater than 1.

Q.2 C=100+0.75Y is a consumption function and investment expenditure is 800. On the basis
of this information calculate- i) equilibrium level of national income, ii) saving at equilibrium
level of national income. iii) Savings function.

Q.3 Explain the process of investment multiplier, with the help of a schedule if MPS = 0.8 ?

Q.4 Explain the Equilibrium by AD-AS approach.