The 'accelerator coefficient' is the ratio of: MCQ with Answer and Explanation

Question

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The 'accelerator coefficient' is the ratio of:

A. saving to investment

B. investment to consumption

C. investment to output

D. change in investment to change in output

Answer: Option D

Solution (By JKSSB Mock Tests)

The accelerator is the ratio of induced investment to a change in output.

This question belongs to: Economy GK Economy Set 1

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Question #1

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Which of the following is a feature of the 'Relative Income Hypothesis' of consumption associated with Duesenberry?

A. Only permanent income matters

B. Consumption depends on an individual’s income relative to the incomes of others and on past peak income

C. Consumption is independent of social comparisons

D. Consumption depends only on absolute current income

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Correct Answer: Option B

Explanation:
Duesenberry’s relative-income hypothesis posits that consumption depends on the individual’s rank in the income distribution and on the highest income previously attained (ratchet effect).

This question belongs to: Economy GK Economy Set 1

Question #2

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Which of the following is an example of a transfer payment?

A. Interest paid on government borrowings

B. Payment for purchase of goods

C. Salary paid to government employees

D. Pension paid to retired employees

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Correct Answer: Option D

Explanation:
Transfer payments are unilateral payments for which no goods or services are received in return, such as pensions, scholarships and unemployment allowances. Interest on borrowings is also a transfer, but pension is a classic example.

This question belongs to: Economy GK Economy Set 1