Question
Match the following :List - I List - II (Multiplier) A. MPC = 0.2 (i) K = 2 B. MPS = 0.5 (ii) K = 1.66 C. MPS = 0.75 (iii) K = 1.33 D. MPC = 0.4 (iv) K = 1.25
Select the correct answer from the codes given below :
The correct answer is
A-(iv), B-(i), C-(iii), D-(ii)
Matching Multiplier (K) with MPC and MPS Values
This question requires matching components of the multiplier effect from List-I with their corresponding multiplier values in List-II. We use the fundamental relationships in the multiplier theory:
- MPC + MPS = 1
- Multiplier, $K = \frac{1}{1 - MPC}$
- Multiplier, $K = \frac{1}{MPS}$
Calculations for List-I Components:
A. MPC = 0.2
- Calculate MPS: $MPS = 1 - MPC = 1 - 0.2 = 0.8$
- Calculate Multiplier K: $K = \frac{1}{MPS} = \frac{1}{0.8} = \frac{10}{8} = 1.25$
- Match: A corresponds to $K = 1.25$, which is (iv).
B. MPS = 0.5
- Calculate Multiplier K: $K = \frac{1}{MPS} = \frac{1}{0.5} = 2$
- Match: B corresponds to $K = 2$, which is (i).
C. MPS = 0.75
- Calculate Multiplier K: $K = \frac{1}{MPS} = \frac{1}{0.75} = \frac{1}{3/4} = \frac{4}{3} \approx 1.33$
- Match: C corresponds to $K \approx 1.33$, which is (iii).
D. MPC = 0.4
- Calculate MPS: $MPS = 1 - MPC = 1 - 0.4 = 0.6$
- Calculate Multiplier K: $K = \frac{1}{MPS} = \frac{1}{0.6} = \frac{1}{3/5} = \frac{5}{3} \approx 1.67$
- Match: D corresponds to $K \approx 1.67$. The closest option is $K = 1.66$, which is (ii).
Correct Matching:
Based on the calculations:
- A corresponds to (iv)
- B corresponds to (i)
- C corresponds to (iii)
- D corresponds to (ii)
The correct code is A-(iv), B-(i), C-(iii), D-(ii).
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Important Questions from Macroeconomics
- Real-factor demand-pull inflection can be caused by:
A. Increase in investment
B. Decrease in consumer demand
C. Decrease in imports given the exports
D. Decrease in exports given the imports
E. Decrease in government expenditure without change in tax revenue.
Choose the correct answer from the options given below : Match List-I with List-II:
List-I (Concepts) List-II (Given by) A. Paradox of thrift I. K. Boulding B. Water-Diamond paradox II. A.C. Pigou C. Wage employment paradox III. J.M. Keynes D. Macroeconomic paradox IV. Adam Smith
Choose the correct answer from the options given below:- Which of the followings are the effects of increase in government spending in IS-LM framework in a closed economy?
A. Increase in income by multiplier times government expenditure.
B. Shift in IS curve to the right leading to disequilibrium in money market at given level of interest rate.
C. Quantity of money demand will be higher.
D. Interest rate will decrease.
Ε. Private investment will increase leading to increase in aggregate demand.
Choose the correct answer from the options given below : - If the marginal propensity to consume is 0.8 and initial increase in tax revenues by the government is Rs. 100, then the impact on national income would be:
- Which of the followings are true about New Classical approach.
A. The main protagonist was R.E. Lucas Jr.
B. It is based on adaptive expectation.
C. It was developed during 1950s.
D. Complete wage and price flexibility.
Ε. Difference between actual and expected price is a random error.
Choose the most appropriate answer from the options given below :
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