Advertisements
Chapters
Chapter 1: Microeconomics and Macroeconomics: Introduction
2: Demand and Law of Demand
3: Theory of Consumer Behaviour: Marginal Utility and Indifference Curve Analysis
4: Elasticity of Demand
5: Supply - Law of Supply and Price Elasticity of Supply
6: Market Mechanism: Equilibrium Price and Quantity in a Competitive Market
7: Laws of Returns - Returns to a Factor and Returns to Scale
8: Cost and Revenue Analysis
9: Forms of Market
10: Producer's Equilibrium
11: Determination of Equilibrium Price and Output Under Perfect Competition
SECTION 2: THEORY OF INCOME AND EMPLOYMENT
▶ 12: Theory of Income and Employment
SECTION 3: MONEY AND BANKING
13: Money: Meaning and Functions
14: Banks: Commercial Bank and Central Bank
SECTION 4: BALANCE OF PAYMENTS AND EXCHANGE RATE
15: Balance of Payments and Exchange Rate
SECTION 5: PUBLIC FINANCE
16: Fiscal Policy
17: Government Budget
SECTION 6: NATIONAL INCOME
18: National Income and Circular Flow of Income
19: National Income Aggregates
20: Methods of Measuring National Income
SECTION 7: PROJECT WORK
21: Project Work
22: Model Short Answer Questions
![Frank solutions for Economics [English] Class 12 ISC chapter 12 - Theory of Income and Employment - Shaalaa.com](/images/economics-english-class-12-isc_6:557367fb4d974c67badae9e1dbdc022d.jpg "Frank solutions for Economics [English] Class 12 ISC chapter 12 - Theory of Income and Employment")
Advertisements
Solutions for Chapter 12: Theory of Income and Employment
Below listed, you can find solutions for Chapter 12 of CISCE Frank for Economics [English] Class 12 ISC.
Frank solutions for Economics [English] Class 12 ISC 12 Theory of Income and Employment TEST YOURSELF QUESTIONS [Pages 228 - 232]
Select the correct option for each of the following questions:
Aggregate demand refers to ______.
total amount of goods and services demanded in the economy
it shows the desired or planned demand
it is positively related to income
all of these
Ex-post demand is known as ______.
effective demand
actual aggregate demand
planned demand
both (a) and (b)
In Keynesian model of income determination ______.
total income in the short-run depends on the desired aggregate demand in the economy.
aggregate demand is positively related to income.
it is always equal to income.
both (a) and (b)
The main components of desired aggregate demand in a closed economy are ______.
desired consumption expenditure
desired investment expenditure
desired government spending
all of these
Basic properties of Keynesian propensity to consume are ______.
c = f(y)
c lies between zero and unity
linear consumption function
none of these
Autonomous consumption means ______.
minimum level of consumption which must be incurred even at the zero level of income.
when C = Y
C > Y
none of these
Which of the following is correct?
APC + APS = 1
MPC = 1 - MPS
APS = `S/Y`
all the above
Investment which varies directly with increase in income is known as ______.
autonomous investment
induced investment
independent investment
none of these
Autonomous investment is the type of investment.
which is not affected by a change in the level of income.
the curve for autonomous investment is a horizontal line parallel to X-axis.
it may change over time due to change in non-income factors.
all of these
Aggregate supply refers to ______.
value of total goods and services produced in an economy.
it is depicted by 45° line originating from the point of origin.
it can be expressed as C + S
all of these
Equilibrium level income as per the Keynesian theory is determined where ______.
aggregate demand curve intersects the 45° line.
the point of intersection of the saving curve and investment curve.
both (a) and (b)
none of these
The value of the investment multiplier shows ______.
there is a direct relationship between multiplier and marginal propensity to consume.
there is an inverse relationship between multiplier and marginal propensity to save.
both (a) and (b)
none of these
Unemployment refers to a situation when ______.
a person is not looking for job
involuntary unemployment
voluntary unemployment
none of these
The amount by which the actual aggregate demand exceeds the aggregate supply corresponding to the full employment level in the economy is known as ______.
excess demand
inflationary gap
excess capacity
both (a) and (b)
The amount by which actual aggregate expenditure falls short of aggregate output corresponding to full employment level in the economy is known as ______.
deficient demand
deflationary gap
both (a) and (b)
none of these
Vecy Short Answer Questions
State the basic proposition of the Keynesian model of income determination.
What is meant by aggregate demand?
State components of aggregate demand.
Distinguish between desired (ex-ante) demand and effective (ex-post) demand.
State the Keynesian theory of propensity to consume.
What is meant by a propensity to consume?
Give the main properties of Keynesian consumption function.
Define marginal propensity to consume (MPC).
Define average propensity to consume (APC).
Briefly explain the shape of the Keynesian consumption function.
What do you mean by a propensity to save?
Differentiate between marginal propensity to save and average propensity to save.
Explain that sum total of c and s is equal to 1.
Explain that sum total of c and s is equal to 1.
Define the term ‘investment’.
Differentiate between private investment and public investment.
Distinguish between autonomous investment and induced investment.
What is meant by aggregate supply in macroeconomics?
What is meant by Equilibrium income?
State briefly the two approaches to the determination of income and output.
Define investment multiplier.
State the formula for the investment multiplier.
How is the investment multiplier related to marginal propensity to consume?
How is the multiplier related to the marginal propensity to save?
Define full employment.
Define involuntary unemployment.
Give the meaning of underemployment equilibrium.
Distinguish between voluntary and involuntary unemployment.
What is ‘excess demand’?
Illustrate graphically the notion of ‘deficient demand.’
Define ‘deficient demand’.
What happens to output, income employment and price level when there is excess demand?
Illustrate graphically the notion of ‘deficient demand.’
How can ‘excess demand’ be tackled?
How can ‘deficient demand’ be tackled?
What is meant by inflationary gap?
Suggest two monetary measures to correct excess demand in an economy.
Explain the concept of ‘deficient demand’ in macroeconomics.
What is a deflationary gap?
State two fiscal measures to correct deficient demand in an economy.
When does a situation of excess demand arise in an economy?
When does a situation of deficient demand arise in an economy?
Short Answer Questions
Explain the various components of aggregate demand in an economy with the help of a diagram.
What is a ‘consumption function’?
Give the main properties of Keynesian consumption function.
Explain MPC and illustrate these through a numerical example.
Explain APC and illustrate this through a numerical example.
Illustrate and explain the Keynesian propensity to consume diagrammatically.
Explain consumption function with the help of a hypothetical consumption schedule.
What is meant by autonomous consumption? Explain with the help of a diagram.
Differentiate between marginal propensity to save and average propensity to save.
Explain MPC.
Explain MPS.
Explain that sum total of c and s is equal to 1.
Define marginal propensity to consume (MPC).
How is marginal propensity to consume different from marginal propensity to save?
Distinguish between average propensity to consume and average propensity to save. How are the two interrelated?
Draw a diagram of a straight-line consumption curve for an economy. Derived the saving curve from it. Explain the method of its derivation.
Define the term ‘investment’.
Distinguish between autonomous investment and induced investment.
Define investment multiplier.
How is the investment multiplier related to marginal propensity to consume?
What is meant by investment multiplier?
Explain the relationship between marginal propensity to save and multiplier.
‘The size of multiplier varies directly with the size of MPC and inversely with MPS’. Elucidate.
Illustrate the working of the multiplier.
Discuss the mechanism of investment multiplier with the help of a numerical.
Define full employment.
Distinguish between voluntary and involuntary unemployment.
What is meant by inflationary gap?
What happens to output, income employment and price level when there is excess demand?
Suggest two monetary measures to correct excess demand in an economy.
State two fiscal measures to correct deficient demand in an economy.
Explain and show graphically the concept of deflationary gap.
Explain any one measure to remove the deflationary gap.
Explain and show graphically the concept of deflationary gap.
State two fiscal measures to correct deficient demand in an economy.
Explain one monetary measure to correct deficient demand.
Explain how fiscal policy measures can be used to reduce excess demand in an economy.
Long Answer Questions
Explain the various components of aggregate demand in an economy with the help of a diagram.
Explain with the help of appropriate diagram, the determination of equilibrium level of income and output, using the aggregate demand and aggregate supply approach. Is this equilibrium level of income full employment level?
Explain with the help of appropriate diagram, the determination of equilibrium level of income and output, using the aggregate demand and aggregate supply approach. Is this equilibrium level of income full employment level?
Explain the determination of national income through the saving-investment approach. Illustrate your answer diagrammatically. Can this equilibrium be at less than full employment level of income?
Explain the determination of national income through the saving-investment approach. Illustrate your answer diagrammatically. Can this equilibrium be at less than full employment level of income?
Explain the determination of national income through the saving-investment approach. Illustrate your answer diagrammatically. Can this equilibrium be at less than full employment level of income?
A given increase in autonomous investment will, in general, cause an increase in income larger than the initial increase in investment. Why? Explain in detail.
Explain and illustrate Keynes’ investment multiplier. Use suitable diagram.
What happens to output, income employment and price level when there is excess demand?
Illustrate graphically the notion of ‘deficient demand.’
What policy measures would you suggest to overcome the situations of excess demand?
How can ‘deficient demand’ be tackled?
What is meant by inflationary gap?
Explain and show graphically the concept of deflationary gap.
What policy measures would you suggest to overcome the situations of excess demand?
Explain and show graphically the concept of deflationary gap.
State two fiscal measures to correct deficient demand in an economy.
Explain one monetary measure to correct deficient demand.
What is meant by inflationary gap?
Explain and show graphically the concept of deflationary gap.
Discuss two monetary measures to correct an inflationary gap.
Discuss two monetary measures to correct the deflationary gap.
Explain the concept of underemployment equilibrium with the help of a diagram.
Show on the same diagram the additional investment expenditure required to reach full employment equilibrium.
Frank solutions for Economics [English] Class 12 ISC 12 Theory of Income and Employment NUMERICAL QUESTIONS [Pages 232 - 233]
Calculate MPC, MPS and APC from the following data:
| Income | Consumption |
| (₹) | (₹) |
| 100 | 95 |
| 110 | 104 |
Calculate MPC, APC, MPS and APS from the following data:
| Income | Consumption |
| (₹) | (₹) |
| 800 | 720 |
| 1,000 | 800 |
Complete the following table:
| Y (₹) | C (₹) | MPC | MPS | APC |
| 1,000 | 800 | – | – | – |
| 2,000 | 1,500 | – | – | – |
| 3,000 | 2,100 | – | – | |
| 4,000 | 2,600 | – | – |
Complete the following table:
| Y | C | S | APS | MPS |
| 0 | 4 | – | ||
| 10 | 12 | – | – | – |
| 20 | 20 | – | – | – |
| 30 | 28 | – | – | – |
In an economy, C = 500 + 0.9Y, and I = 1,000. Calculate the following:
- Equilibrium level of income
- Consumption expenditure at an equilibrium level of income.
If the marginal propensity to consume is 0.75, what is the value of the multiplier? If the MPC increases to 0.9, how would the multiplier be affected?
In an economy, MPS = 0.2. Investment increases by 500 crore. Calculate the total increase in income.
If the value of the multiplier is 4, calculate the value of MPC and MPS.
If MPC is 0.75 how much increase in investment is required to increase the income by ₹600 crore?
Find the value of additional investment made by the government when MPC = 0.5 and the increase in income (ΔY) = ₹ 1000.
If the value of MPC is 0.9, find the value of the multiplier.
If the value of the multiplier is 4, calculate the value of MPC and MPS.
Frank solutions for Economics [English] Class 12 ISC 12 Theory of Income and Employment Thinking Beyond [Page 233]
Why can the value of MPC be not greater than one?
Suppose the consumption function is given as C = 50 + 0.80. Write the corresponding saving function.
Can the value of investment multiplier be zero? Explain.
The value of the multiplier lies between 1 and ∞. Explain.
Thriftiness is usually regarded as a virtue and, hence, desirable. But Keynes argued that saving becomes a vice in the economies where there is excess production capacity and unemployment. This is known as ‘paradox of thrift’. How would you explain paradox of thrift?
Solutions for 12: Theory of Income and Employment
Frank solutions for Economics [English] Class 12 ISC chapter 12 - Theory of Income and Employment
Shaalaa.com has the CISCE Mathematics Economics [English] Class 12 ISC CISCE solutions in a manner that help students grasp basic concepts better and faster. The detailed, step-by-step solutions will help you understand the concepts better and clarify any confusion. Frank solutions for Mathematics Economics [English] Class 12 ISC CISCE 12 (Theory of Income and Employment) include all questions with answers and detailed explanations. This will clear students' doubts about questions and improve their application skills while preparing for board exams.
Further, we at Shaalaa.com provide such solutions so students can prepare for written exams. Frank textbook solutions can be a core help for self-study and provide excellent self-help guidance for students.
Concepts covered in Economics [English] Class 12 ISC chapter 12 Theory of Income and Employment are Basic Model of Income Determination, Aggregate Demand and Its Components, Propensity to Consume or Consumption Function, Propensity to Save, Investment Expenditure, Determination of Equilibrium Income and Output, Investment Multiplier and Its Mechanism, The Concept of Full Employment, Saving-investment Approach, Important Terms of Employment and Unemployment, Excess Demand, Deficient Demand, Solved Problems on Consumption and Income.
Using Frank Economics [English] Class 12 ISC solutions Theory of Income and Employment exercise by students is an easy way to prepare for the exams, as they involve solutions arranged chapter-wise and also page-wise. The questions involved in Frank Solutions are essential questions that can be asked in the final exam. Maximum CISCE Economics [English] Class 12 ISC students prefer Frank Textbook Solutions to score more in exams.
Get the free view of Chapter 12, Theory of Income and Employment Economics [English] Class 12 ISC additional questions for Mathematics Economics [English] Class 12 ISC CISCE, and you can use Shaalaa.com to keep it handy for your exam preparation.
