The average propensity to consume is the ratio of:

• A) Total consumption to total disposable income at a specific income level.
• B) A change in consumption to total disposable income at a specific income level.
• C) A change in consumption to a change in disposable income.
• D) Total consumption to a change in disposable income.

Suppose the consumption function is C = 1000 + 0.75Y. If Y = 100, then the amount of consumption is:

• A) 1075.
• B) 1750.
• C) 1500.
• D) 1100.

Total income minus net taxes is called:

• A) Individual income.
• B) Per capita income.
• C) Personal income.
• D) Disposable income.

The method which sums up all the incomes earned by all factors of production in the economy is known as:

• A) The factor income method
• B) The value added method
• C) The spending method
• D) The expenditure method

GDP measures which of the following?

• A) All of the given options.
• B) Expenditures on all final goods and services.
• C) Total value-added by all firms in the economy.
• D) Total income of everyone in the economy.

An exchange rate of 123 Japanese yen (JPY, ¥) to the United States dollar (USD, $)
means that JPY 123 is worth:

• A) The same as USD 5
• B) The same as USD 1
• C) Less than the USD 1
• D) More than the USD 1

From 2005 to 2006, change in disposable income is Rs. 430, 000 and change in consumption is Rs. 250, 000. What is the value of marginal propensity to consume?

• A) 0.058
• B) 0.72
• C) 1.72
• D) 0.58

Inverse relationship between the inflation rate and the unemployment rate is explained by:

• A) Price adjustment curve.
• B) Phillips Curve.
• C) Aggregate demand curve.
• D) Okun law.

Data that is recorded in money terms, unadjusted for inflation is called:

• A) Real data
• B) Nominal data
• C) Primary data
• D) Secondary data

The most commonly used index to calculate the inflation is:

• A) Wholesale Price Index (WPI)
• B) Producer Price Index (PPI)
• C) Consumer Price Index (CPI)
• D) GDP Deflator

Consider a closed economy where total savings equals Rs. 70000, investment is Rs. 90000 and total tax collection is Rs. 35000. What are leakages into the circular flow of income?

• A) Rs.125, 000
• B) Rs.160, 000
• C) Rs.105, 000
• D) Rs.195, 000

Falling inflation means that price level is rising at a(n):

• A) Fluctuating rate.
• B) Decreasing rate.
• C) Increasing rate.
• D) Constant Rate.

Macroeconomics equilibrium in a Keynesian sense obtains when:

• A) Total leakages = Total expenditures
• B) Total injections = Total investment
• C) Total injections = Total income
• D) Total injections = Total leakages

Suppose the consumption function is C = 450 + 0.5 Yd. What is marginal propensity to consume?

• A) 1.5
• B) 50
• C) 0.5
• D) 5

GDP Deflator is calculated as:

• A) Real GDP/Nominal GDP
• B) Nominal income/Real income
• C) Nominal interest rate/Real interest rate
• D) Nominal GDP/Real GDP

The output level in long run is determined by:

• A) Money supply.
• B) Aggregate demand.
• C) Aggregate supply.
• D) The government.

The saving function is:

• A) The ratio of a change in planned saving to a change in disposable income.
• B) The level of planned saving at different levels of disposable income.
• C) The level of planned saving for every change in disposable income.
• D) The ratio of total saving to total disposable income.

In Keynesian economics, an inflationary gap results if aggregate expenditures are:

• A) Undetermined.
• B) Greater than aggregate production.
• C) Less than aggregate production.
• D) Equal to aggregate production.

Suppose the consumption function is C = 350 + 0.5 Yd. If the value of disposable income is Rs. 13000 then total consumption equals:

• A) Rs. 6950.
• B) Rs. 6150.
• C) Rs. 6450.
• D) Rs. 6850.

Suppose the overall production of goods and services increases in a country because of technological improvement. This will shift:

• A) Aggregate demand curve to the right.
• B) Aggregate demand curve to the left.
• C) Aggregate supply curve to the right.
• D) Aggregate supply curve to the left.