ZAFAR ACADEMY

Educating minds
th
Test 4th : Class 12 Marks 50
Topic: AD, Foreign Exchange, Money and Banking Time: 1 hr.
Set: B
General Instruction:
i. It is natural to feel there are many better than me in this class. Do not validate that
feeling by looking in their answer sheets (SIMPLY- DO NOT COPY)
ii. Enjoy writing the paper from your heart as if you and the paper are one.
iii. This is your moment of truth and your answer sheet is the practical evidence.
iv. All the Best.

Descriptive Questions
Question:1 What is Currency Devaluation? What are its likely impact upon import & Export of the
country
5 marks
Question:2 What do you understand by controller of money supply and credit. Explain any 2 qualitative
instruments used by RBI to controll the money supply in the economy.
5 marks
Question:3 What is Aggregate Demand. Explain 4 componenets of aggregate demand. Also draw diagram.
5
marks

Multiple Choice Question 1 marks

each

Savings S
( )
1. Out of the following, which can have a value more the one?
(a) APS = (b) MPC = 1 - MPS
a) MPC Income Y
b) APC
(c) APC + APS = 1 (d) All of these
c) APS
d) MPS

5. Aggregate supply and _ are always equal.

2. Which of the following is not a component of aggregate demand a) National Income
in a two sector economy? b) Aggregate Demand
c) Marginal Propensity to save
a) Net Exports
d) Average Propensity to consume
b) Government Expenditure
c) Consumption
d) Both a) and b)
6. Consumption function(Propensity to consume) is the functional
relationship between _ and ___ .
3. Break-even point is achieved when: a) Consumption, Aggregate demand
b) Consumption, National Income
a) National Income = Consumption
c) Aggregate Demand, Aggregate Supply
b) Consumption = Saving
d) National Income, Private Income
c) APS = 1
d) National Income > Consumption

7. Tick the wrong option:

4. Which of the following is correct? a) APC can be more than 1
b) APC can be equal to 1
c) APC rises with increases in income a) APS, APC
d) APC can be less than 1 b) MPC, APS
c) APC, APS
d) MPS, APC
8. How are both APC and APS associated with National Income?

(a) both APC and APS fall with increase in National Income
(b) both APC and APS rise with increase in National Income
(c) APC falls APS rises with increase in national income
(d) APC rises APS falls with increase in national income
16. Which of the following expression is correct?
a) APC = Consumption/National Income
b) APC = Change in Consumption/Change in National Income
c) APC = 1 – APS
d) Both a & c

9. Which of the following is not true about AD in a two sector

17. If C = 100 + 0.75Y, then Saving Function will be expressed as:
economy?
a) S = 100 + 0.25Y
a) AD = Consumption + saving
b) S = -100 + 0.75Y
b) AD curve starts from some point above the origin
c) S = -100 + 0.25Y
c) AD = Consumption + Investment
d) S = 75 + 0.25Y
d) AD curve has a positive slope

18. At the break-even point:

10. Which of the following fact is correct about MPC?
a) Consumption curve lies below the 45 degree line
a) Value of MPC varies between 0 and 1
b) Consumption curve intersects 45 degree line
b) MPC of poor is more than that of rich
c) Consumption curve lies above the 45 degree line
c) MPC falls with successive increase in income
d) None of these
d) All of the above

19. Suppose in a hypothetical economy, the income rises from

11. Which of these is a component of Aggregate Demand.
₹5,000 crores to ₹6,000 crores. As a result, the consumption
a) Private consumption expenditure expenditure rises from ₹4,000 crores to ₹4,600 crores. Marginal
b) Investment expenditure propensity to consume in such a case would be __ .
c) Savings
a) 0.8
d) Both A & B
b) 0.4
c) 0.2
d) 0.6
12. Which of the following can have a negative value?

a) APC
b) MPC 20. Average Propensity to consume can never be __ .
c) MPS
a) positive
d) APS
b) zero
c) more than one
d) less than one
13. AD curve starts:

a) From the origin

b) Point Below the origin 21. Which of the following is correct?
c) Point above the origin
a) MPC + APC = 1
d) None of these
b) MPC + APS = 1
c) MPC + MPS = 1
d) MPC – MPS = 1
14. Autonomous investment curve (when on X-axis, Income is
shown and on Y-axis, Autonomous Investment is shown) is always

(a) a horizontal straight line.
(b) (b) negatively related to income
(c) an upward rising straight line
(d) always equal to income
22. Consumption curve makes an intercept on the Y-axis. It
indicates that:
a) Saving is positive when income is zero
b) Consumption is positive when income is zero
c) Saving is negative when income is positive
d) consumption is zero when income is zero

15. The value of _ can never be negative, while ___ can have a
value eqaul to one. 23. Relationship of APC and APS with national income can be
represented as:
a) Both APC and APS fall with increase in National Income
b) Both APC and APS rise with increase in National Income
30. If the vaue of Average Propensity to save (APS) is 0.2 and
c) APS falls, while APC rises with increase in National Income
National Income is ₹4,000 crore, then consumption will be __ .
d) APC falls, while APS rises with increase in National Income
a) ₹4,000 crores
b) ₹3,200 crores
24. In the saving Function: S = -100 + 0.6Y, the value of c) ₹3,800 crores
autonomous consumption will be: d) ₹2,600 crores

a) 0.6 31. Aggregate Consumption expenditure in an economy is:

b) -100
a) Always Positive
c) 0.4
b) Always Negative
d) 100
c) Positive in the beginning and then negative
d) Negative in the beginning and then positive

25. If MPC is 0.5, what will be change in consumption, if income

increases by Rs.100 crore?
32. MPC = 0, when:
(a) Rs.60 crore (b) Rs.50 crore
a) Increase in Saving = Increase in Income
(c) Rs.40 crore (d) Rs.70 crore b) Entire increase in income is saved
c) Increase in Consumption = Increase in Income
d) Both a) and b)
26. Which of the following is true about AD in a two sector
economy:
33. The Consumption of an economy is given as C = 40 + 0.80Y,
a) AD = Consumption + Investment
then value of MPS is:
b) AD curve starts from some point above the origin
c) AD curve has a positive slope a) 0.80
d) All of these b) 1.00
c) 0.40
d) 0.20
27. Which of the following statements is false?

a) At break even point, the value of APC is one

34. Choose the correct statement:
b) The value of marginal propensity to consume is always positive
c) APC can never be greater than one a) Aggregate Demand = Consumption+Investment
d) APS can zero and negative b) Aggregate Supply = Consumption + Saving
c) Both a) and b)
d) Neither a) nor b)
28. Which of the following is correct

a) MPC + MPS = 1
35. If MPC is 0.6, what will be the change in consumption, if
b) MPC + MPS > 1
income increases by 100.
c) MPC – MPS = 1
d) MPC + MPS = 0 a) 40
b) 50
c) 60
29. When S changes from -30 to -20, then ΔS is equal to: d) 70

(a) -10 (b) +10

(c) -20 (d) -30