Basic Model of Income Determination

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  • Q1

    By propensity to save we mean the

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    Answer:

    relation between income and saving.

    Explanation:

    There is direct relation between income and savings. When income increases the rate of savings also increases and vice-versa.

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  • Q2

    The relationship between MPC and MPS is that

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    Answer:

    MPC + MPS = 1

    Explanation:
    MPS + MPC = 1
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  • Q3

    By consumption function we mean the

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    Answer:

    relation between consumption and income.

    Explanation:
    The relationship between consumption and income is called Propensity to consume or consumption function C = f ( y ).
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  • Q4

    Net Export is a component of

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    Answer:

    Aggregate Demand.

    Explanation:
    Aggregate demand is the total of consumption expenditure plus government expenditure plus investment expenditure plus net exports.
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  • Q5

    Aggregate demand is defined as the

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    Answer:

    total demand of goods and services.

    Explanation:
    Aggregate demand is total demand for goods and services in an economy during a particular year.
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