Plus Two / 12th Economics - Book Back Answers - Chapter 4 - English Medium
Chapter 4: Consumption and Investment Functions
Tamil Nadu Board 12th Standard Economics - Chapter 4: Book Back Answers and Solutions
This post covers the book back answers and solutions for Chapter 4 from the Tamil Nadu State Board 12th Standard Economics textbook. These detailed answers have been carefully prepared by our expert teachers at KalviTips.com.
We have explained each answer in a simple, easy-to-understand format, highlighting important points step by step under the relevant subtopics. Students are advised to read and memorize these subtopics thoroughly. Once you understand the main concepts, you’ll be able to connect other related points with real-life examples and confidently present them in your tests and exams.
By going through this material, you’ll gain a strong understanding of Chapter 4 along with the corresponding book back questions and answers (PDF format).
Question Types Covered:
- 1 Mark Questions: Choose the correct answer, Fill in the blanks, Identify the correct statement, Match the following
- 2 Mark Questions: Answer briefly
- 3, 4, and 5 Mark Questions: Answer in detail
All answers are presented in a clear and student-friendly manner, focusing on key points to help you score full marks.
All the best, Class 12 students! Prepare well and aim for top scores. Thank you!
Chapter 4: Consumption and Investment Functions
I. Choose the correct answer.
1. The average propensity to consume is measured by
a) C/Y
b) CxY
c) Y/C
d) C+Y
Answer Key:
a) C/Y
2. An increase in the marginal propensity to consume will:
a) Lead to consumption function becoming steeper
b) Shift the consumption function upwards
c) Shift the consumption function downwards
d) Shift savings function upwards
Answer Key:
a) Lead to consumption function becoming steeper
3. If the Keynesian consumption function is C=10+0.8 Y then, if disposable
income is Rs 1000, what is amount of total consumption?
a) ₹ 0.8
b) ₹ 800
c) ₹ 810
d) ₹ 0.81
Answer Key:
c) ₹ 810
4. If the Keynesian consumption function is C=10+0.8Y then, when disposable
income is Rs 100, what is the marginal propensity to consume?
a) ₹ 0.8
b) ₹ 800
c) ₹ 810
d) ₹ 0.81
Answer Key:
a) ₹ 0.8
5. If the Keynesian consumption function is C=10+0.8 Y then, and disposable
income is ô€€…100, what is the average propensity to consume?
a) ₹ 0.8
b) ₹ 800
c) ₹ 810
d) ₹0.9
Answer Key:
d) ₹0.9
6. As national income increases
a) The APC falls and gets nearer in value to the MPC.
b) The APC increases and diverges in value from the MPC.
c) The APC stays constant
d) The APC always approaches infinity.
Answer Key:
a) The APC falls and gets nearer in value to the MPC.
7. As increase in consumption at any given level of income is likely to lead
a) Higher aggregate demand
b) An increase in exports
c)A fall in taxation revenue
d) A decrease in import spending
Answer Key:
a) Higher aggregate demand
8. Lower interest rates are likely to:
a) Decrease in consumption
b) increase cost of borrowing
c) Encourage saving
d) increase borrowing and spending
Answer Key:
d) increase borrowing and spending
9. The MPC is equal to:
a) Total spending / total consumption
b) Total consumption/total income
c) Change in consumption /change in income
d) none of the above.
Answer Key:
c) Change in consumption /change in income
10. The relationship between total spending on consumption and the total
income is the ___________________
a) Consumption function
b) Savings function
c) Investment function
d) aggregate demand function
Answer Key:
a) Consumption function
11. The sum of the MPC and MPS is _______
a) 1
b) 2
c) 0.1
d) 1.1
Answer Key:
a) 1
12. As income increases, consumption will _________
a) fall
b) not change
c) fluctuate
d) increase
Answer Key:
d) increase
13. When investment is assumed autonomous the slope of the AD schedule is determined by the _____
a) marginal propensity to invest
b) disposable income
c) marginal propensity to consume
d) average propensity to consume
Answer Key:
c) marginal propensity to consume
14. The multiplier tells us how much __________ changes after a shift in _____
a) Consumption , income
b) investment, output
c) savings, investment
d) output, aggregate demand
Answer Key:
d) output, aggregate demand
15. The multiplier is calculated as
a) 1/(1-MPC)
b) 1/MPS
c) 1/MPC
d) a and b
Answer Key:
d) a and b
16. It the MPC is 0.5, the multiplier is ____________
a) 2
b)1/2
c) 0.2
d) 20
Answer Key:
a) 2
17. In an open economy import _________ the value of the multiplier
a) Reduces
b) increase
c) does not change
d) changes
Answer Key:
a) Reduces
18. According to Keynes, investment is a function of the MEC and _____
a) Demand
b) Supply
c) Income
d) Rate of interest
Answer Key:
d) Rate of interest
19. The term super multiplier was first used by
a) J.R.Hicks
b) R.G.D. Allen
c) Kahn
d) Keynes
Answer Key:
a) J.R.Hicks
20. The term MEC was introduced by
a) Adam Smith
b) J.M. Keynes
c) Ricardo
d) Malthus
Answer Key:
b) J.M. Keynes
a) C/Y
b) CxY
c) Y/C
d) C+Y
Answer Key:
a) C/Y
2. An increase in the marginal propensity to consume will:
a) Lead to consumption function becoming steeper
b) Shift the consumption function upwards
c) Shift the consumption function downwards
d) Shift savings function upwards
Answer Key:
a) Lead to consumption function becoming steeper
3. If the Keynesian consumption function is C=10+0.8 Y then, if disposable
income is Rs 1000, what is amount of total consumption?
a) ₹ 0.8
b) ₹ 800
c) ₹ 810
d) ₹ 0.81
Answer Key:
c) ₹ 810
4. If the Keynesian consumption function is C=10+0.8Y then, when disposable
income is Rs 100, what is the marginal propensity to consume?
a) ₹ 0.8
b) ₹ 800
c) ₹ 810
d) ₹ 0.81
Answer Key:
a) ₹ 0.8
5. If the Keynesian consumption function is C=10+0.8 Y then, and disposable
income is ô€€…100, what is the average propensity to consume?
a) ₹ 0.8
b) ₹ 800
c) ₹ 810
d) ₹0.9
Answer Key:
d) ₹0.9
6. As national income increases
a) The APC falls and gets nearer in value to the MPC.
b) The APC increases and diverges in value from the MPC.
c) The APC stays constant
d) The APC always approaches infinity.
Answer Key:
a) The APC falls and gets nearer in value to the MPC.
7. As increase in consumption at any given level of income is likely to lead
a) Higher aggregate demand
b) An increase in exports
c)A fall in taxation revenue
d) A decrease in import spending
Answer Key:
a) Higher aggregate demand
8. Lower interest rates are likely to:
a) Decrease in consumption
b) increase cost of borrowing
c) Encourage saving
d) increase borrowing and spending
Answer Key:
d) increase borrowing and spending
9. The MPC is equal to:
a) Total spending / total consumption
b) Total consumption/total income
c) Change in consumption /change in income
d) none of the above.
Answer Key:
c) Change in consumption /change in income
10. The relationship between total spending on consumption and the total
income is the ___________________
a) Consumption function
b) Savings function
c) Investment function
d) aggregate demand function
Answer Key:
a) Consumption function
11. The sum of the MPC and MPS is _______
a) 1
b) 2
c) 0.1
d) 1.1
Answer Key:
a) 1
12. As income increases, consumption will _________
a) fall
b) not change
c) fluctuate
d) increase
Answer Key:
d) increase
13. When investment is assumed autonomous the slope of the AD schedule is determined by the _____
a) marginal propensity to invest
b) disposable income
c) marginal propensity to consume
d) average propensity to consume
Answer Key:
c) marginal propensity to consume
14. The multiplier tells us how much __________ changes after a shift in _____
a) Consumption , income
b) investment, output
c) savings, investment
d) output, aggregate demand
Answer Key:
d) output, aggregate demand
15. The multiplier is calculated as
a) 1/(1-MPC)
b) 1/MPS
c) 1/MPC
d) a and b
Answer Key:
d) a and b
16. It the MPC is 0.5, the multiplier is ____________
a) 2
b)1/2
c) 0.2
d) 20
Answer Key:
a) 2
17. In an open economy import _________ the value of the multiplier
a) Reduces
b) increase
c) does not change
d) changes
Answer Key:
a) Reduces
18. According to Keynes, investment is a function of the MEC and _____
a) Demand
b) Supply
c) Income
d) Rate of interest
Answer Key:
d) Rate of interest
19. The term super multiplier was first used by
a) J.R.Hicks
b) R.G.D. Allen
c) Kahn
d) Keynes
Answer Key:
a) J.R.Hicks
20. The term MEC was introduced by
a) Adam Smith
b) J.M. Keynes
c) Ricardo
d) Malthus
Answer Key:
b) J.M. Keynes
II.Answer the following questions.
12th Economics (soon)
III. Answer the following questions.
12th Economics (Soon)
IV. Answer the following questions.
12th Economics (Soon)
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