Assertion Reason: Determination of Income and Employment, Class 12

1. Assertion (A): Consumption can be greater than income. Reason (R) : There is always some minimum level of consumption even when income is zero.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is A)

2.Assertion (A): Average propensity to save can never become negative. Reason (R) : APS shows saving per unit of total income.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is D)

3. Assertion (A): Unplanned inventories accumulate when planned investment is less than planned savings i.e. producers are left with unsold stock of goods as planned savings are more than planned investments. Reason (R): In a situation of deficiency of AD in relation to AS, Aggregate demand is less than Aggregate supply when buyers are consuming less and thus spending less. It means that thay are planning to buy less than what sellers are planning to sell.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is A)

4.Assertion (A): Higher the value of MPC, higher is the multiplier and more chances of economic growth and increase in National income. This happens when MPS falls and MPC rises. Reason (R): Investment generate income and this additional income causes a change in consumption. Additional consumption expenditure generates additional income for producers of goods and services. This process keeps repeating till the total increases in income equals the product of multiplier and change in investment.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is A)

5.Statements 1:If MPC is 0.8, then APC will also be 0.8. Statement 2:APC is the ratio of change in consumption and change in income.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is B)
1. No relation between MPC and APC and 2. APC is the ration between consumption and income.

6.Statement 1: Autonomous consumption leads to negative saving. Statement 2: That proportion of income which is not consumed is saved.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is A)

7.Assertion (A): There is an equilibrium in the economy, when Ad=AS. Reason (R): When Ad= AS, the intended production in the economy is equal to the intended purchase.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is A)

8.Assertion (A): Ex-post investment is always less than ex-ante investment. Reason (R): Equilibrium GDP is struck only when planned saving= planned investment.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is D)

9.Assertion (A): Consumption curve makes an intercept on the Y-axis, some point above the origin. Reason(R): People need certain basic goods and services to sustain themselves, even if income is zero.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is A)

10.Assertion (A):Higher the value of MPC, the higher is the value of Investment Multiplier.Reason (R):Investment Multiplier is directly related to MPS.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is C)

11.Assertion (A): Poor people have a lower propensity to consume as compared to Rich people. Reason(R): Consumption can never be zero even if the national income is zero.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B)Both (A) and Reason (R) is 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

... Answer is D)

12.Assertion (A): At the time of full employment, there is an absence of involuntary unemployment. Reason (R): Voluntary unemployment is not included while estimating the size of unemployment.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is B)

13. Assertion (A):MPS varies between 0 and infinity. Reason (R): Incremental income is either spent on consumption or saved for future use.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is D)

14.Assertion (A): Excess demand refers to the situation when aggregate demand is in excess of aggregate supply corresponding to full employment in the economy i.e. AD>AS, corresponding to full employment. It is when actual level of aggregate demand is more than required or planned level of aggregate demand to maintain full employment. Reason (R): To correct inflationary gap, Bank Rate, Repo Rate and Legal reserve ratio is increased by the Central Bank to reduce supply of money so that purchasing power of people can be curtailed and inflationary gap can be controlled.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is B)

15.Assertion (A): At the Break-Even point, consumption is equal to National Income. Reason (R): APC falls continuously with an increase in income as the proportion of income spent on consumption keeps on decreasing.

A) Both (A) and Reason (R) is true and Reason (R) is the Correct explanation of Assertion (A)
B) Both (A) and Reason (R) is 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

... Answer is B)

16.Statement 1: Value of APC can never be grater than one. Statement 2: Value of MPC can be greater than one.

A) Both the statements are true
B) Both the statements are false
C) Statements 1 is true and Statements 2 is false
D) Statements 2 is true and Statements 1 is false

... Answer is B)
1. APC can be greater than 1 when C is greater Y. 2. Maximum value of MPC is 1

17.Statement 1: AS is indicated by 45 degree line. Statement 2: AD is stock concept.

A)Both the statements are true
B) Both the statements are false
C) Statements 1 is true and Statements 2 is false
D) Statements 2 is true and Statements 1 is false

... Answer is C)

18.Statement 1: The producer suffer losses when actual stocks are less than the desire stocks. Statement 2: Output is determine by the level of investment in the economy.

A) Both the statements are true
B) Both the statements are false
C) Statements 1 is true and Statements 2 is false
D) Statements 2 is true and Statements 1 is false

... Answer is C)

19.Statement 1: Multiplier is the reciprocal of marginal propensity to save. Statement 2: Higher the value of MPS, higher the value of multiplier.

A) Both the statements are true
B)Both the statements are false
C) Statements 1 is true and Statements 2 is false
D) Statements 2 is true and Statements 1 is false

... Answer is C)

20.Statement 1: If investment increases by Rs 100 crore and MPC= 0.5, the increase in income will be two times the increase in investment. Statement 2: Multiplier action is forward when there is multiplier increase in income caused by an increase in investment.

A)Both the statements are true
B) Both the statements are false
C) Statements 1 is true and Statements 2 is false
D) Statements 2 is true and Statements 1 is false

... Answer is A)