Equilibrium Of National Income Quiz

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Quizzes Created: 1 | Total Attempts: 113

Questions: 15 | Attempts: 113 | Updated: Jul 25, 2023

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Equilibrium Of National Income Quiz - Quiz

Questions and Answers

1.

Consumption is the function of ________

Explanation
Consumption is the function of income because the level of income directly affects the amount of money that individuals or households can spend on goods and services. Generally, as income increases, people have more disposable income to spend, leading to higher levels of consumption. On the other hand, if income decreases, people may have to cut back on their spending, resulting in lower levels of consumption. Therefore, income plays a crucial role in determining the level of consumption in an economy.

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2.

Y - C equals ________

Explanation
The correct answer is "Saving" because the equation Y - C equals [Blank] is a basic formula in macroeconomics known as the national saving identity. In this equation, Y represents national income or output, and C represents consumption. By subtracting consumption from national income, we are left with the amount of income that is not consumed, which is commonly referred to as saving. Therefore, the blank in the equation represents the concept of saving.

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3.

C + S equals ________

Explanation
The given correct answer for the question is "Income". This suggests that when C (cost) is added to S (savings), the result is income. This implies that income can be seen as the sum of both costs and savings.

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4.

Consumption remains positive even at ________ level of income.

Explanation
Consumption remains positive even at a zero level of income because individuals may still have access to savings or borrowing options to maintain their consumption levels. Additionally, there may be non-income factors such as government transfers or assistance programs that can contribute to consumption even when income is zero.

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5.

Value of MPC lies between 0 and________

Explanation
The value of MPC (Marginal Propensity to Consume) represents the proportion of an increase in income that is spent on consumption. It measures how much individuals or households spend out of each additional unit of income they receive. The value of MPC can range between 0 and 1, where 0 means that no additional income is spent on consumption, and 1 means that all additional income is spent on consumption. Therefore, the correct answer is 1.

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6.

If Sana consumes Rs 600 out of her Rs.1000 income, her Average consumption (APC) Is ________

Explanation
The average consumption (APC) can be calculated by dividing the total consumption by the total income. In this case, Sana's total consumption is Rs 600 and her total income is Rs 1000. Therefore, the APC is 600/1000 = 0.6.

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7.

If Asad's income increases from 400 to 800 & his consumption from 300 to 600, his MPC will be ________

Explanation
The MPC (Marginal Propensity to Consume) measures the change in consumption relative to the change in income. In this case, Asad's income has doubled from 400 to 800, and his consumption has also doubled from 300 to 600. The MPC can be calculated by dividing the change in consumption (600-300=300) by the change in income (800-400=400). Therefore, the MPC is 300/400=0.75.

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8.

MPC + MPS equals ________

Explanation
MPC + MPS equals 1 because MPC (Marginal Propensity to Consume) represents the portion of additional income that is spent, while MPS (Marginal Propensity to Save) represents the portion that is saved. Since all income is either consumed or saved, the sum of MPC and MPS must equal 1.

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9.

If Sarah's MPC is 0.87 her MPS will be________

Explanation
The correct answer is 0.13 because MPC (Marginal Propensity to Consume) and MPS (Marginal Propensity to Save) are complementary. MPC represents the portion of an additional dollar of income that is spent on consumption, while MPS represents the portion that is saved. Since MPC + MPS = 1, if Sarah's MPC is 0.87, her MPS would be 0.13 (1 - 0.87). This means that for every additional dollar of income, Sarah will spend 0.87 cents and save 0.13 cents.

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10.

If Uzma's APS is 0.25 her APC will be ________
11.

If income increases,consumption also increases, this relationship is called________

Explanation
The given correct answer is "Positive". When income increases, it leads to an increase in consumption. This implies that there is a positive relationship between income and consumption. As income rises, individuals have more disposable income, which allows them to spend more on goods and services, leading to an increase in consumption.

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12.

Graph of consumption function does not start from the ________

Explanation
The graph of the consumption function does not start from the origin because it represents the relationship between consumption and income. At zero income, individuals still have some level of consumption, such as basic necessities or savings. Therefore, the consumption function starts at a positive level of consumption rather than at zero.

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13.

S = Y - ________

Explanation
The correct answer is C because it completes the equation S = Y - C. The given equation is missing a term, and the letter C is the only option that can be subtracted from Y to complete the equation.

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14.

Consumption cannot be zero or negative but ________ can be zero or negative.

Explanation
Consumption refers to the amount of goods and services that individuals or households purchase and use. It cannot be zero or negative because it represents the spending and utilization of resources. On the other hand, saving refers to the portion of income that is not spent and is instead kept aside for future use. Saving can be zero if all income is spent, or it can be negative if individuals borrow or dip into their savings to finance their consumption.

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15.

1- MPC =________