The 'investment multiplier' is greater when the marginal propensity to consume is: MCQ with Answer and Explanation

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The 'investment multiplier' is greater when the marginal propensity to consume is:

A. negative

B. higher

C. lower

D. zero

Answer: Option B

Solution (By JKSSB Mock Tests)

The multiplier is higher when MPC is higher because more of each income increase is spent.

This question belongs to: Economy GK Economy Set 1

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Practice More Economy Set 1 Questions

Question #1

Average product is obtained by dividing total product by:

A. fixed input

B. marginal product

C. units of variable input

D. total cost

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Correct Answer: Option C

Explanation:
Average product is total product divided by the units of the variable input used.

This question belongs to: Economy GK Economy Set 1

Question #2

Which of the following is a feature of the 'Life-Cycle' and 'Permanent-Income' hypotheses taken together?

A. Both assume infinite horizons only

B. Both emphasise that consumption depends on long-run resource constraints rather than current income alone

C. Both claim that only current income matters

D. Both ignore the role of wealth

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Correct Answer: Option B

Explanation:
Both the life-cycle hypothesis and the permanent-income hypothesis assert that forward-looking consumers base consumption on expected lifetime or permanent resources rather than on current income alone.

This question belongs to: Economy GK Economy Set 1

Question #3

If nominal GDP is Rs 12,500 crore and real GDP is Rs 10,000 crore, the GDP deflator is:

A. 125

B. 100

C. 80

D. 150

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Correct Answer: Option A

Explanation:
GDP deflator = (12500/10000) × 100 = 125.

This question belongs to: Economy GK Economy Set 1

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