{"id":27506,"date":"2019-10-07T12:12:35","date_gmt":"2019-10-07T06:42:35","guid":{"rendered":"http:\/\/mycbseguide.com\/blog\/?p=27506"},"modified":"2019-10-08T15:01:17","modified_gmt":"2019-10-08T09:31:17","slug":"determination-of-income-and-employment-class-12-economics-extra-questions","status":"publish","type":"post","link":"https:\/\/mycbseguide.com\/blog\/determination-of-income-and-employment-class-12-economics-extra-questions\/","title":{"rendered":"Determination of Income and Employment Class 12 Economics Extra Questions"},"content":{"rendered":"<p><strong>Determination of Income and Employment Class 12 Economics Extra Questions. <\/strong>myCBSEguide has just released Chapter Wise Question Answers for class 12 Economics. There chapter wise Practice Questions with complete solutions are available for download in\u00a0<strong><a href=\"https:\/\/mycbseguide.com\/\">myCBSEguide<\/a>\u00a0<\/strong>website and mobile app. These test papers with solution are prepared by our team of expert teachers who are teaching grade in CBSE schools for years. There are around 4-5 set of solved Economics Test Papers from each and every chapter. The students will not miss any concept in these Chapter wise question that are specially designed to tackle Board Exam. We have taken care of every single concept given in <strong><a href=\"https:\/\/mycbseguide.com\/course\/cbse-class-12-economics\/1327\/\">CBSE Class 12 Economics syllabus<\/a><\/strong>\u00a0and questions are framed as per the latest marking scheme and blue print issued by CBSE for class 12.<\/p>\n<p style=\"text-align: center;\"><strong>CBSE Class 12 Economics Extra Questions<\/strong><\/p>\n<p style=\"text-align: center;\"><strong><a class=\"button\" href=\"https:\/\/mycbseguide.com\/dashboard\/category\/1336\/type\/4\">Download as PDF<\/a><\/strong><\/p>\n<h2>Practice Questions for Class 12 Economics<\/h2>\n<p style=\"text-align: center;\"><strong>Determination of Income and Employment<\/strong><\/p>\n<hr \/>\n<ol style=\"padding-left: 20px;\">\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>In S = &#8211; a + (1 &#8211; b) Y, \u2018a\u2019 denotes <strong>(<\/strong><b>1)<\/b><\/p>\n<\/div>\n<\/div>\n<div>\n<div>\n<div>\n<ol style=\"list-style-type: lower-alpha;\" start=\"1\">\n<li>Automatic consumption expenditure<\/li>\n<li>Annual consumption expenditure<\/li>\n<li>Autonomous savings.<\/li>\n<li>Consumption expenditure<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>MPC = 1 &#8211; MPS. It is <strong>(<\/strong><b>1)<\/b><\/p>\n<\/div>\n<\/div>\n<div>\n<div>\n<div>\n<ol style=\"list-style-type: lower-alpha;\" start=\"1\">\n<li>None of these<\/li>\n<li>True.<\/li>\n<li>Depends on their values<\/li>\n<li>False.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">If MPC is less than one, it follows that <strong>(<\/strong><b>1)<\/b><\/div>\n<\/div>\n<div>\n<div>\n<ol style=\"list-style-type: lower-alpha;\" start=\"1\">\n<li>(1-b) i.e. MPS is zero<\/li>\n<li>(1-b) i.e. MPS is positive<\/li>\n<li>(1-b) i.e. MPS is negative<\/li>\n<li>(1-b) i.e. MPS is infinity<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>The formula of investment multiplier in terms of MPS is <strong>(<\/strong><b>1)<\/b><\/p>\n<\/div>\n<\/div>\n<div>\n<div>\n<div>\n<ol style=\"list-style-type: lower-alpha;\" start=\"1\">\n<li><span class=\"math-tex\">{tex}\\frac{{\\Delta C}}{{\\Delta D}}{\/tex}<\/span><\/li>\n<li><span class=\"mcq_option_text\"><span class=\"math-tex\">{tex}1 \\over MPS{\/tex}<\/span><\/span><\/li>\n<li><span class=\"mcq_option_text\"><span class=\"math-tex\">{tex}\\frac{C}{{\\Delta I}}{\/tex}<\/span><\/span><\/li>\n<li><span class=\"mcq_option_text\"><span class=\"math-tex\">{tex}\\frac{C}{Y}{\/tex}<\/span><\/span><\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>Why should price rise only after full employment? <strong>(<\/strong><b>1)<\/b><\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>If planned saving are greater than planned investments, what will be its effect on inventories? <strong>(<\/strong><b>1)<\/b><\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">What is full employment? <strong>(<\/strong><b>1)<\/b><\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>Categorise the following as induced investment and autonomous investment. <strong>(1)<\/strong><\/p>\n<ol style=\"list-style-type: lower-roman;\" start=\"1\">\n<li>Government has set up public health centres in rural areas.<\/li>\n<li>Government has decided to invest Rs. 1,000 crore to save Sunder ban Forests.<\/li>\n<li>Airtel has invested ? 1,000 crore to improve its services.<\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>Calculate the equilibrium level of income in the economy. <strong>(3)<\/strong><br \/>\nC = 500 + (0.9)Y;<br \/>\nInvestment expenditure = 3,000<\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>From the following data calculate investment expenditure: <strong>(3)<\/strong><br \/>\nMarginal Propensity to Save = 0.2<br \/>\nEquilibrium level of income = Rs 22,500<br \/>\nAutonomous consumption = Rs 500.<\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>What is deficient demand in an economy? What is its impact on output, employment and prices? <strong>(<\/strong><b>4)<\/b><\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>Calculate Autonomous Consumption expenditure from the following data about an economy which is in equilibrium: <strong>(4)<\/strong><br \/>\nNational Income = Rs 1,200<br \/>\nMarginal Propensity to Save = 0.20<br \/>\nInvestment expenditure = Rs 100<\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>If planned saving is less than planned investment, what changes will bring economy in equilibrium? <strong>(<\/strong><b>4)<\/b><\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>Differentiate induced and autonomous investment. Explain and show them with the help of a diagram also? <strong>(<\/strong><b>6)<\/b><\/p>\n<\/div>\n<\/div>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<div class=\"question-container\">\n<div class=\"question-text\">\n<p>Calculate investment expenditure from the following data about an economy which is in equilibrium. <strong>(6)<\/strong><br \/>\nNational Income = Rs 1,000<br \/>\nMarginal Propensity to Save = 0.20<br \/>\nAutonomous consumption expenditure = Rs 100<\/p>\n<\/div>\n<\/div>\n<\/li>\n<\/ol>\n<p style=\"page-break-before: always; text-align: center;\"><strong>Determination of Income and Employment<\/strong><\/p>\n<hr \/>\n<p style=\"text-align: center;\"><strong>Answers<\/strong><\/p>\n<ol style=\"padding-left: 20px;\">\n<li class=\"question-list\" style=\"clear: both;\">\n<ol style=\"margin-top: 5px; padding-left: 15px; list-style-type: lower-alpha;\" start=\"3\" type=\"a\">\n<li>Autonomous savings.<br \/>\n<strong>Explanation:\u00a0<\/strong>&#8216;a&#8217; is constant which implies that this saving takes place even when income is zero and is independent of the level of income.So, &#8216;a&#8217; denotes autonomous savings.<\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<ol style=\"margin-top: 5px; padding-left: 15px; list-style-type: lower-alpha;\" start=\"2\" type=\"a\">\n<li>True.<br \/>\n<strong>Explanation:<\/strong><br \/>\nMPS + MPC = 1<br \/>\nMPC = 1 &#8211; MPS<\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<ol style=\"margin-top: 5px; padding-left: 15px; list-style-type: lower-alpha;\" start=\"2\" type=\"a\">\n<li>(1-b) i.e. MPS is positive<br \/>\n<strong>Explanation:\u00a0<\/strong>b stands for MPC. So, when b is less than 1, evidently 1-b is positive or 1-b&gt;0<\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<ol style=\"margin-top: 5px; padding-left: 15px; list-style-type: lower-alpha;\" start=\"2\" type=\"a\">\n<li><span class=\"math-tex\">{tex}1 \\over MPS{\/tex}<\/span><strong style=\"font-size: 0.9em;\">Explanation:<\/strong>\u00a0<span class=\"math-tex\">{tex}1 \\over MPS{\/tex}<\/span><\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">Price level do not rise before full employment because AS is assumed to be perfectly elastic. Whatever be the level of aggregate demand, AS converges with AD so that AD and AS tends to be equal without causing any change in price level. But when AD increases beyond its full employment level, then the mounting pressure of demand on the existing output casuses a rise in prices.<\/li>\n<li class=\"question-list\" style=\"clear: both;\">The inventories will rise.<\/li>\n<li class=\"question-list\" style=\"clear: both;\">It is a situation in which all those people who are able and willing to work at the prevailing wage rate get work.<\/li>\n<li class=\"question-list\" style=\"clear: both;\">i.&amp;ii .Autonomous Investment: Establishment of public health centres and governments investment on saving Sunder ban forests. These investments are not done with profit motive.iii.Induced Investment : Airtel investment is driven by profit motive.<\/li>\n<li class=\"question-list\" style=\"clear: both;\">Given C = 500 + (0.9)Y,<br \/>\nInvestment expenditure, (I) = Rs.3,000;<br \/>\nAt equilibrium level, Y = C + I<br \/>\n<span class=\"math-tex\">{tex} \\Rightarrow {\/tex}<\/span> Y = 500 + (0.9) Y+ 3,000<br \/>\n<span class=\"math-tex\">{tex} \\Rightarrow {\/tex}<\/span> Y &#8211; (0.9)Y = 3,500 =&gt; (0.1)Y = 3,500<span class=\"math-tex\">{tex}Y = \\frac { 3,500 } { 0 .1 } = 735,000{\/tex}<\/span>. Therefore equilibrium level of Income = Rs. 735,000.<\/li>\n<li class=\"question-list\" style=\"clear: both;\">Given, Marginal Propensity to Save (MPS ) = 0.2, Income (Y) = 22,500, <span class=\"math-tex\">{tex}\\overline { C } = 500{\/tex}<\/span>,<br \/>\nWe know that, MPC = 1 &#8211; MPS = 1 &#8211; 0.2 = 0.8.<br \/>\nAt equilibrium level,<br \/>\nY = C + I<br \/>\nTherefore 22,500 = 500 + (0.8) 22,500 + I<br \/>\nOr I = 22,500 &#8211; 500 &#8211; 18,000 = Rs.4,000. Hence we have Investment Expenditure equal to Rs. 4000.<\/li>\n<li class=\"question-list\" style=\"clear: both;\">Deficient demand refers to the situation when AD is short of AS corresponding to the full employment level in the economy.\n<ol style=\"list-style-type: lower-roman;\" start=\"1\">\n<li>Effect on output : Low level of investment and employment implies low level of output.<\/li>\n<li>Effect on employment : Because of deficiency of demand, investment level is reduced. Accordingly, level of employment tends to fall.<\/li>\n<li>Effect on prices : Fall in prices is the immediate consequence of deficient demand.<\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\"><strong>Calculation of Autonomous Consumption <span class=\"math-tex\">{tex}( \\overline { C } ){\/tex}<\/span>:<\/strong>Given,\n<ol>\n<li>National Income (Y) = Rs 1,200<\/li>\n<li>Investment Expenditure (I) = Rs 100,<\/li>\n<li>Marginal Propensity to Save (MPS) = 0.20<\/li>\n<\/ol>\n<p>Calculation of Marginal Propensity to Consume (MPC or b)<br \/>\n= 1 &#8211; Marginal Propensity to Save(MPS)<br \/>\n=1-0.20 = 0.80<br \/>\n<span class=\"math-tex\">{tex}\\therefore{\/tex}<\/span> MPC = 0.80<br \/>\nAlso, Y = C + I, or Y <span class=\"math-tex\">{tex}= \\overline { C } + b Y + I{\/tex}<\/span> &#8230;.. (i)<br \/>\n<span class=\"math-tex\">{tex}\\because \\quad C = \\overline { C } + b Y{\/tex}<\/span><br \/>\nOn substituting the given variables in equation (i), we get<br \/>\n<span class=\"math-tex\">{tex}1,200 = \\overline { \\mathrm { C } } + 080 \\times 1,200 + 100{\/tex}<\/span><br \/>\n<span class=\"math-tex\">{tex}1,200 = \\overline { C } + 960 + 100{\/tex}<\/span><br \/>\n<span class=\"math-tex\">{tex}= \\overline { \\mathrm { C } } + 1,060{\/tex}<\/span><br \/>\n<span class=\"math-tex\">{tex}\\therefore \\overline { C }{\/tex}<\/span>= 1,200 &#8211; 1,060 = Rs 140<br \/>\n<span class=\"math-tex\">{tex}\\therefore{\/tex}<\/span> Autonomous consumption expenditure <em><strong><span class=\"math-tex\">{tex}( \\overline { C } ) = Rs \\ 140{\/tex}<\/span><\/strong><\/em><\/li>\n<li class=\"question-list\" style=\"clear: both;\">AD = AS<br \/>\nC + I = C + S<br \/>\nI = C + S -C = S<\/p>\n<ol style=\"list-style-type: lower-roman;\" start=\"1\">\n<li>when planned saving is less than planned investment, then national income will decrease as shown in the below diagram.<br \/>\n<img loading=\"lazy\" decoding=\"async\" id=\"Picture_x0020_6\" class=\"alignnone\" title=\"Determination of Income and Employment Class 12 Economics Extra Questions\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/quesbank\/12\/eco\/Capture157.PNG\" alt=\"Determination of Income and Employment Class 12 Economics Extra Questions\" width=\"213\" height=\"161\" \/><\/li>\n<li>When, investment &gt; saving [at Y1], then production will have to be increased to meet the excess demand. Consequently, national income will increase leading to rise in saving until saving becomes equal to investment. It is here that equilibrium level of income is established because what the savers intend to save becomes equal to what the investors intend to invest.<\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">\n<ol style=\"list-style-type: lower-roman;\" start=\"1\">\n<li>Induced Investment:\n<ol style=\"list-style-type: lower-alpha;\" start=\"1\">\n<li>Induced investment is positively related to the level of income in an economy. At higher level of income, consumption expenditure tends to increase. Increased consumption expenditure or level of demand raises expected profitability of the producer who accordingly are induced to make greater investment.<\/li>\n<li>Induced investment curve has a positive slope showing direct relationship between income and investment.<\/li>\n<\/ol>\n<\/li>\n<li>Autonomous Investment :<br \/>\nAn investment which is not influenced by expected profitability or level of income is called autonomous investment. In fact, it is an investment expenditure incurred by the government with a view to promoting the level of aggregate demand in the economy when AD falls short of AS, resulting in fall in prices and rise in unemployment. The govt. intends in push up the level of AD by way of its autonomous investment. Autonomous investment is independent of the level of income. It is also profit and income inelastic.<br \/>\n<img loading=\"lazy\" decoding=\"async\" id=\"Picture_x0020_8\" class=\"alignnone\" title=\"Determination of Income and Employment Class 12 Economics Extra Questions\" src=\"https:\/\/media-mycbseguide.s3.amazonaws.com\/images\/quesbank\/12\/eco\/Capture153.PNG\" alt=\"Determination of Income and Employment Class 12 Economics Extra Questions\" width=\"465\" height=\"170\" \/><\/li>\n<\/ol>\n<\/li>\n<li class=\"question-list\" style=\"clear: both;\">Given, National Income (Y) = 1,000,<br \/>\nMarginal Propensity to Save (MPS) = 0.20,<br \/>\nAutonomous Consumption <span class=\"math-tex\">{tex}(\\overline C ){\/tex}<\/span> = 100<br \/>\nMPC or b = 1 &#8211; MPS = 1 &#8211; 0.20 = 0.80<br \/>\nY = C + I<br \/>\nC = <span class=\"math-tex\">{tex}\\overline C {\/tex}<\/span> + b(Y)<br \/>\n\u2234 Y = <span class=\"math-tex\">{tex}\\overline C {\/tex}<\/span> + b(Y) + I<br \/>\n\u2234 On substituting the given variables above, we get<br \/>\n<span class=\"math-tex\">{tex}1,000 = 100 + 0.80 \\times 1,000 + I{\/tex}<\/span><br \/>\nI = 1000 &#8211; 900 = 100<br \/>\ni.e. Investment = Rs 100<\/li>\n<\/ol>\n<h2>Chapter Wise Practice Test for Class 12 Economics<\/h2>\n<ol>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/extra-questions-for-class-12-economics-national-income-and-related-aggregates\/\">National Income and Related Aggregates<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/class-12-economics-money-and-banking-important-questions\/\">Money and Banking<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/determination-of-income-and-employment-class-12-economics-extra-questions\/\">Determination of Income and Employment<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/extra-question-for-class-12-economics-government-budget-and-the-economy\/\">Government Budget and the Economy<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/balance-of-payments-foreign-exchange-class-12-economics-extra-questions\/\">Balance of Payments &amp; Foreign Exchange<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/indian-economy-on-the-eve-of-independence-class-12-economics-practice-questions\/\">Indian Economy on the Eve of Independence<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/class-12-economics-indian-economy-1950-90-extra-questions\/\">Indian Economy 1950-90<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/economic-reforms-since-1991-class-12-economics-important-questions\/\">Economic Reforms Since 1991<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/poverty-class-12-economics-important-questions\/\">Poverty<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/important-questions-for-class-12-economics-human-capital-formation-in-india\/\">Human Capital Formation in India<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/important-questions-for-class-12-economics-rural-development\/\">Rural Development<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/employment-growth-informational-and-other-issues-class-12-economics-extra-questions\/\">Employment Growth Informational and other Issues<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/class-12-economics-infrastructure-important-questions\/\">Infrastructure<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/class-12-economics-environment-sustainable-development-extra-questions\/\">Environment Sustainable Development<\/a><\/li>\n<li><a href=\"https:\/\/mycbseguide.com\/blog\/important-questions-for-class-12-economics-development-experiences-india-neighbours\/\">Development Experiences India &amp; Neighbours<\/a><\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"<p>Determination of Income and Employment Class 12 Economics Extra Questions. myCBSEguide has just released Chapter Wise Question Answers for class 12 Economics. There chapter wise Practice Questions with complete solutions are available for download in\u00a0myCBSEguide\u00a0website and mobile app. These test papers with solution are prepared by our team of expert teachers who are teaching grade &#8230; <a title=\"Determination of Income and Employment Class 12 Economics Extra Questions\" class=\"read-more\" href=\"https:\/\/mycbseguide.com\/blog\/determination-of-income-and-employment-class-12-economics-extra-questions\/\" aria-label=\"More on Determination of Income and Employment Class 12 Economics Extra Questions\">Read more<\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1346,1437],"tags":[157,1839,1838,1833,1832],"class_list":["post-27506","post","type-post","status-publish","format-standard","hentry","category-cbse","category-economics-cbse-class-12","tag-cbse-class-12-economics","tag-extra-questions","tag-important-questions","tag-latest-exam-questions","tag-practice-questions"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Determination of Income and Employment Class 12 Economics Extra Questions<\/title>\n<meta name=\"description\" content=\"Determination of Income and Employment Class 12 Economics Extra Questions These solution are prepared by our team of expert teachers.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, 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