Students of class 12 Economics should refer to MCQ Questions Class 12 Economics Determination of Income and Employment with answers provided here which is an important chapter in Class 12 Economics NCERT textbook. These MCQ for Class 12 Economics with Answers have been prepared based on the latest CBSE and NCERT syllabus and examination guidelines for Class 12 Economics. The following MCQs can help you to practice and get better marks in the upcoming class 12 Economics examination

Chapter 10 Determination of Income and Employment MCQ with Answers Class 12 Economics

MCQ Questions Class 12 Economics Determination of Income and Employment provided below have been prepared by expert teachers of grade 12. These objective questions with solutions are expected to come in the upcoming Standard 12 examinations. Learn the below provided MCQ questions to get better marks in examinations.

Question: Deflationary gap is measured as :
a) ADF + ADU
b) ADF÷ ADU
c) ADF – ADU
d) None of these 

Question: Which of the following does not lead to fall in AD ?
a) Fall in private consumption expenditure
b) Fall in export
c) Fall in Import
d) Fall in Government Expenditure 

Question: Deficient or excess demand can be corrected through
a) Fiscal Policy
b) Monetary Policy
c) Both (a) and (b)
d) None of these

Question: Propensity to consume means:
a) Tendency of the consumer towards higher consumption
b) Ratio of consumption to income
c) Level of income at which consumption expenditure is equal to income
d) Additional income to be spent on consumption 

 Question: MPC being equal to 0.5, what will be , if income increases by Rs.100?
a) Rs. 60
b) Rs. 50
c) Rs. 40
d) Rs. 70 

Question: Which of the following is correct ?
a) MPC÷MPS=1
b) 1-MPC=MPS
c) 1-MPS= MPC
d) All of these 

Question: On account of injections and withdrawals, equilibrium level of income undergoes :
a) A shift
b) No shift
c) A dispersal
d) No change 

Question: According to Keynes, equality (equilibrium) between AD and AS can take place in a situation
a) Less than full employment
b) Full employment
c) Beyond full employment
d) All of these 

Question: Which of the following indicates AD in an open economy?
a) Private (household) Consumption Expenditure
b) Household Investment Expenditure
c) Government expenditure + private consumption expenditure
d) Household consumption expenditure+ investment expenditure + government expenditure + net exports 

Question: Consumption function is a functional relationship between:
a) Income and saving
b) Price and consumption
c) Income and consumption
d) Income, consumption and saving 

Question: Multiplier is estimated as:
a) 1/MPC
b) 1/1-MPC
c) 1/1+MPC
d) 1/1+MPS 

Question: If MPS =1/4, the value of multiplier will be :
a) 4
b) 2
c) 8
d) 6 

Question: A tax the burden of which can be shifted on to others, is called :
a) Indirect Tax
b) Direct Tax
c) Ad Valorem
d) Specific Tax 

Question: The difference between fiscal and interest payment is called :
a) Revenue Deficit
b) Primary Deficit
c) Bbudget Deficit
d) Capital Deficit 

Question: If the value exports exceeds the value of visible imports, the current account deficit will be:
a) Positive
b) Negative
c) Positive or Negative
d) None of these

Question: Propensity to save means:
a) Ratio of saving to income
b) level of income at which saving is equal to income
c) Additional income that is not to be saved
d) None of these 

Question: If MPS is 0.6,what will be ΔS when income increases by Rs.100 ?
a) Rs. 60
b) Rs. 50
c) Rs. 40
d) Rs.70 

Question: If MPC = 0.9, than value of multiplier will be:
a) 6
b) 9
c) 10
d) 12

Question: Multiplier=
a) ΔY/ΔS
b) ΔY/ΔI
c) ΔI/ΔY
d) ΔY/ΔC 

Question: If MPC = 0, the multiplier will be:
a) 1
b) 0
c) 2
d) X 

Question: If an investment of Rs. 10 crore results in an increase in income by Rs 50 crore, then the multiplier will be:
a) 5
b) 4
c) 2
d) None of these 

Question: Deficient demand leads to :
a) Deflationary Gap
b) Inflationary Gap
c) Both and (a) and (b)
d) None of these 

Question: With a view to correcting deflationary gap or deficient demand, which of the following fiscal policy measures should be adopted ?
a) Reduction in taxes
b) Increase in public expenditure
c) Reduction in public debt
d) All of these 

Question: Which of the following leads to increase in AD ?
a) Fall in imports
b) Increase in investment expenditure
c) Increase in government expenditure
d) All of these 

Question: Of the following, what are the quantitative measures of monetary policy ?
a) Repo rate
b) Open market operations
c) SLR
d) All of these 

Question: If MPC is 40 per cent, MPS will be
a) 70 percent
b) 60 percent
c) 50 percent
d) 40 percent 

Question: Since As= C+S and AD=C+I the equilibrium will be established where C+S= C+I, or where:
a) S=I
b) S>I
c) S<I
d) All the above 

Question: Equilibrium level of income/ output and employment is viewed from which of the following approaches ?
a) AS=AD approach
b) S=I approach
c) Both (a) and (b)
d) None of these 

Question. Which of the following is true ?
a) Employment level declines due to decrease in demand
b) Price level falls due to deficient demand in the country
c) Production level falls deficient demand
d) All the above

Question. Which of the following cause trade cycle ?
a) Deflationary Conditions
b) Inflationary Conditions
c) Both (a) and (b)
d) None of these

Question. “Change in Government Spending” is a part of:
a) Monetary Policy
b) Fiscal Policy
c) Either a) or b)
d) Neither a) nor b)

Question. Deficient Demand leads to:
a) Decrease in Planned Output
b) Fall in General Prices
c) Both a) and b)
d) Rise in Employment Level

Question. Deficient Demand indicates:
a) Under employment equilibrium
b) Over full employment equilibrium
c) Full employment equilibrium
d) None of these

Question. If an economy is to control recession like most of the Euro Zone nations, which of the following can be appropriate: 
a) Reducing Repo Rate
b) Reducing CRR
c) Both a) and b)
d) None of a) and b)

Question. When Planned Saving is less than Planned Investment, then:
a) National Income is likely to fall
b) There will be nochane in National Income
c) National Income is likely to rise
d) None of these

Question. What is the value of multiplier, when saving function is represented as: S = -60 + 0.2Y?
a) 2
b) 5
c) 4
d) 1.25

Question. In determination of Equilibrium Level of Income by AD-AS approach, AD curve is represented by:
a) (C+I) Curve 
b) (C+S) Curve
c) (S+I) Curve
d) (C+Y) Curve

Question. _______ is the change in the consumption per unit change in income.
a) Average propensity to consume
b) Marginal propensity to save
c) Marginal propensity to consume
d) Average propensity to save

Question. ______ refers to the rate at which RBI lends to commercial banks against security.
a) Repo rate
b) Open market operation
c) Reverse repo rate
d) Marginal requirement

Question. “The aggregate demand in an economy is rising”. What can be the possible reasons for this?
a) Rise in exports
b) Fall in imports
c) Rise in investment expenditure
d) All of the above

Question. Which or is true?
a) MPC + MPS = 0
b) MPC + MPS < 1
c) MPC + MPS = 1
d) MPC + MPS > 1

Question. According to classical economists, there always exists ______ equilibrium in the economy.
a) Full employment
b) Underemployment
c) Over full employment
d) None of these

Question. What is a fiscal measure of correcting deficient demand?
a) Increase in public expenditure and decrease in taxes
b) Decrease in public debt
c) Deficit financing
d) All of these

Question. On the basis of government law, the compulsory payment made by the public is known as _________
a) Expenditure
b) Investment
c) Tax
d) Subsidy

Question. Find autonomous consumption expenditure,if at equilibrium, national income is ₹1,500 crores; investment expenditure ₹300 crores; Marginal Propensity to Consumer is 0.7.
a) ₹140 crore
b) ₹150 crore
c) ₹100 crore
d) ₹120 crore

Question. Which fiscal measure should be adopted for correcting Deficient Demand ?
a) Government should spend more in public works
b) Taxation should be reduced
c) Pubic debt should be reduced
d) All the above

Question. Income and employment are determined by:
a) Total demand
b) Total supply
c) Total demand and total supply both
d) By market demand.

Question. Assertion (A): Full employment does not imply zero unemployment in an economy.
Reason (R): There are certain people in the economy who are both voluntary as well involuntary unemployed and there also exist certain level of natural unemployment in an economy.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Both Assertion (A) and Reason (R) are false

Question. Assertion (A): According to Keynesian theory, equilibrium level is always achieved at full employment level. 
Reason (R): At full-employment equilibrium, there is no involuntary unemployment.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Assertion (A) is False but Reason (R) is True

Question. Assertion (A): During the pandemic, income of the people have fallen and as a result there has been a reduction in aggregate demand.
Reason (R): According to the Keynesian economics, government should follow expansionary fiscal policy implying a higher level of government expenditure and lower level of taxes.
Alternatives:
a) Both Assertion and Reason are true and Reason (R) is the correct explanation of Assertion (A)
b) Both Assertion and Reason are true and Reason (R) is not the correct explanation of Assertion (A)
c) Assertion (A) is True but Reason (R) is False
d) Both Assertion (A) and Reason (R) are false

We hope the above multiple choice questions for Class 12 Economics for Chapter 10 Determination of Income and Employment provided above with answers based on the latest syllabus and examination guidelines issued by CBSE, NCERT and KVS are really useful for you. Determination of Income and Employment is an important chapter in Class 12 as it provides very strong understanding about this topic. Students should go through the answers provided for the MCQs after they have themselves solved the questions. All MCQs have been provided with four options for the students to solve. These questions are really useful for benefit of class 12 students. Please go through these and let us know if you have any feedback in the comments section.