Income Determination Test

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Income Determination Test - 17

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Weekly Quiz Competition

Question 1
1 / -0

The period of time, when supply is fully adjusted to change in demand is called_________.

A
short period.

B
very short period.

C
mid period.

D
long period.

Solution

The period of time, when supply is fully adjusted to change in demand is called long term period. During the long period, all factors of production of inputs in the industry can be converted into variable. In the long run the firms can change the scale of production, the plant size can be changed, etc. Thus, in long run supply can be fully adjusted to the change in demand.
Question 2
1 / -0

Higher level of current consumption means ___________.

A
higher economic growth in future

B
slower economic growth in future

C
higher capital formation in future

D
no change in growth rate

Solution

Resources are scarce in nature, so if it will be consumed in large amount then future generation will not be able to meet their needs and it will result in slower economic growth.
As income is either consumed or invested, therefore if the consumption is greater than the investment then the proportion of income invested will be less which will hamper the future income and which will again decrease the investment that will ultimately result in slower economic growth in future.
Question 3
1 / -0

What are the accounting values of GDP called?

A
ex post

B
national income

C
probability income

D
I=S

Solution

The accounting values of GDP are called ex post which refers to the actual aggregates of all economic variables. For example, ex post savings and ex post investment which refers to the actual savings and actual investment of an economy in a specified period of time.
Question 4
1 / -0

Which is the other name that is given to the average revenue curve?

A
Profit Curve

B
Demand Curve

C
Average Cost Curve

D
Indifference Curve

Solution

Average revenue curve is just like demand curve as the it represents the product's demand. Average revenue is total revenue divided by quantity. Just like demand curve price is represented on the y-axis and quantity on x-axis, Each point on the AFC curve shows the price of the product and the demand of the product at the given price, hence AFC curve is also known as demand curve.
Question 5
1 / -0

What would price ceiling lead to when the maximum price is fixed lower than the equilibrium price?

A
Excess demand.

B
Excess supply.

C
Deficient demand.

D
None of the above

Solution

Price ceiling means that a maximum price that can be charged for a product is fixed by the government. The sellers cannot charge a price beyond it. Price ceiling is done to help the people to get goods at a lower rate and save them from getting exploited. Hence, when the prices are reduced the demand for that commodity increases due to the mechanism of law of demand, while supply decreases, leading to excess demand.
Question 6
1 / -0

At $$ P_X $$ = Rs. 5, demand for Good-X is $$30$$ units and supply of Good-X is $$20$$ units, it is a situation of:

A
excess demand.

B
excess supply.

C
equilibrium.

D
none of the above

Solution

Excess demand is a situation where the demand for a product is more than the supply for the product. In the given question, demand for good X is 30 units and supply for good X is 20 units. Hence, the excess demand is 10 units.
Question 7
1 / -0

Which of the following statements is correct, in the case of excess demand?

A
Market supply will be less than market demand

B
Equilibrium price and equilibrium quantity will increase.

C
Both (a) and (b).

D
Neither (a) nor (b).

Solution

In case of excess demand market supply will be less than market demand and equilibrium price and quantity will decrease. Its a situation in market when at the given price the quantity demanded id more than quantity supplied. Due to competition the prices will rise and then buyers will demanding less of the commodity. When the price is high suppliers increase the supply thereby increasing the supply as well as price of the commodity.
Question 8
1 / -0

The formula for the MPC is ___________.

A
the change in consumption divided by the change in income

B
consumption divided by income

C
consumption plus saving divided by income

D
the change in income divided by the change in consumption.

Solution

Consumption is dependent on income and thus, consumption changes with change in income. Marginal Propensity to Consume (MPC) refers to the change in consumption level that takes place due to an additional unit of income earned.
Symbolically: $$MPC=\dfrac{\text{Change in consumption}}{\text{Change in income}}$$
Question 9
1 / -0

If income changes from 3000 to 4500 and saving changes from 600 to 900, then calculate MPS?

A
0.2

B
0.1

C
0.2 for time period 1 and 0.1 for time period 2.

D
0.1 for time period 1 and 0.2 for time period 2.

Solution

MPS = (Change in savings)/(Change in Income),

So,

MPS = (600-900)/(4500-3000)
= 300/1500
= 0.2
Question 10
1 / -0

If consumption in period 1 is Rs 5,000 and income is Rs 10,000 and the same for period 2 stands at 7,160 and 13,000 respectively, find MPC.

A
0.72

B
0.84

C
0.66

D
0.33

Solution

MPC = $$\dfrac{\text{Change in C}}{\text{Change in Y}}$$
where, C = consumption,
and Y = Income

$$MPC =$$ $$\dfrac{7160-5000}{13000-10000} =$$ $$\dfrac{2160}{3000}$$ $$= 0.72$$

$$MPC = 0.72$$

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Re-Attempt Weekly Quiz Competition

Income Determination Test - 17

Result

Income Determination Test - 17

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SHARING IS CARING

Question 1

short period.

very short period.

mid period.

long period.

Solution

Question 2

higher economic growth in future

slower economic growth in future

higher capital formation in future

no change in growth rate

Solution

Question 3

ex post

national income

probability income

I=S

Solution

Question 4

Profit Curve

Demand Curve

Average Cost Curve

Indifference Curve

Solution

Question 5

Excess demand.

Excess supply.

Deficient demand.

None of the above

Solution

Question 6

excess demand.

excess supply.

equilibrium.

none of the above

Solution

Question 7

Market supply will be less than market demand

Equilibrium price and equilibrium quantity will increase.

Both (a) and (b).

Neither (a) nor (b).

Solution

Question 8

the change in consumption divided by the change in income

consumption divided by income

consumption plus saving divided by income

the change in income divided by the change in consumption.

Solution

Question 9

0.2

0.1

0.2 for time period 1 and 0.1 for time period 2.

0.1 for time period 1 and 0.2 for time period 2.

Solution

Question 10

0.72

0.84

0.66

0.33

Solution

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