Download App

Determination of Income and Employment — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsDetermination of Income and Employment6 Marks
Question
Discuss relationship between MPC and MPS.
✓

Answer

The relationship between these two is as under:
  1. If MPC remains constant, MPS would also be constant.
Y C S $\Delta\text{Y}$ $\Delta\text{S}$ $\Delta\text{C}$ MPC MPS
3000 3000 - - - - - -
4000 3800 200 1000 200 800 0.8 0.2
5000 4600 400 1000 200 800 0.8 0.2
6000 5400 600 1000 200 800 0.8 0.2
7000 6200 800 1000 200 800 0.8 0.2
  1. If MPC falls, MPS increases and vice versa.
Y C S $\Delta\text{Y}$ $\Delta\text{S}$ $\Delta\text{C}$ MPC MPS
3000 3000 - - - - - -
4000 3800 200 1000 200 800 0.8 0.2
5000 4550 450 1000 250 750 0.75 0.25
6000 5250 750 1000 300 700 0.7 0.3
7000 5900 1100 1000 350 650 0.65 0.35
$\text{MPC}\downarrow\rightarrow\text{MPS}\uparrow$
  1. MPC + MPS = 1
Proof: We know that income (Y) is either spent on consumption (C) or saved (S), i.e.,
Y = C + S
or $\Delta\text{Y}=\Delta\text{C}+\Delta\text{S}$
By dividing both sides by AY, we get,
$\frac{\Delta\text{Y}}{\Delta\text{Y}}=\frac{\Delta\text{C}}{\Delta\text{Y}}+\frac{\Delta\text{S}}{\Delta\text{Y}}$
1 = MPC + MPS
Numericals:
You Must Know,
  1. $\text{Y}=\text{C}+\text{S}$
  2. $\text{AD}=\text{C}+\text{I}$
  3. $\text{AS}=\text{C}+\text{S}$
  4. $\text{APS}=\frac{\text{C}}{\text{Y}}=1-\text{APS}$
  5. $\text{MPS}=\frac{\Delta\text{C}}{\Delta\text{Y}}=1-\text{MPS}$
  6. $\text{MPS}=\frac{\Delta\text{S}}{\Delta\text{Y}}=1-\text{MPC}$
  7. $\text{C}=\bar{\text{C}}+\text{B}(\text{Y})$
  8. $\text{S}=-\bar{\text{C}}+(1-\text{b})\text{Y}$

Need a full question paper?

Generate a complete, print-ready paper with questions like this in minutes — across 16+ boards, with answer keys.

Start Generating Free

Explore more

More "6 Marks Question" from Determination of Income and Employment→Determination of Income and Employment — all question types→Economics STD 12 Humanities & Commerce question papers→Rajasthan Board STD 12 Humanities & Commerce question papers→Rajasthan Board question paper generator→

Similar questions

Calculate the $(a)$ Net National Product at market price, and $(b)$ Gross National Disposable Income$:$
    $₹ ($in crores$)$
$(i)$ Mixed income of self$-$employed $8,000$
$(ii)$ Depreciation $200$
$(iii)$ Profit $1,000$
$(iv)$ Rent $600$
$(v)$ Interest $700$
$(vi)$ Compensation of employees $3,000$
$(vii)$ Net indirect taxes $500$
$(viii)$ Net factor income to abroad $60$
$(ix)$ Net exports $(–) 50$
$(x)$ Net current transfers to abroad $20$
→
From the following data, calculate $(a)$ Gross Domestic Product at Factor Cost and $(b)$ Factor Income To Abroad:
  $(Rs.$ in $000$ crore$)$
  1. Compensation of employees
 $800$
  1. Profits
 $200$
  1. Dividends
 $50$
  1. Gross national product at market price
 $1,400$
  1. Rent
 $150$
  1. Interest
 $100$
  1. Gross domestic capital formation
 $300$
  1. Net fixed capital formation
 $200$
  1. Change in stock
 $50$
  1. Factor income from abroad
 $60$
  1. Net indirect taxes
 $120$
→
When is an economy in equilibrium? Explain with the help of saving and investment functions. Also explain the changes that take place in an economy when the economy is not in equilibrium. Use diagram.
→
How is tax revenue different from administrative revenue?
→
Suppose C = 100 + 0.75Y, $\triangle\text{I}=500,$ G = 750, taxes are 20% of income, X = 150, M = 100 + 0.2Y and classify whether it is budget deficit or surplus and trade deficit or surplus.
→
Explain the precautions that should be taken in estimating national income by expenditure method.OR
What precautions should be taken while estimating national income by expenditure method? Explain.
→
Calculate $(a)$ net domestic product at factor cost and $(b)$ gross national disposable income:
    $Rs.$ in crores
$(i)$ Private final consumption expenditure $8000$
$(ii)$ Government final consumption expenditure $1000$
$(iii)$ Exports $70$
$(iv)$ Imports $120$
$(v)$ Consumption of fixed capital $60$
$(vi)$ Gross domestic fixed capital formation $500$
$(vii)$ Change in stock $100$
$(viii)$ Factor income to abroad $40$
$(ix)$ Factor income from abroad $90$
$(x)$ Indirect taxes $700$
$(xii)$ Net current transfers to abroad $(–30) $
→
What is ‘effective demand’? How will you derive the autonomous expenditure multiplier when price of final goods and the rate of interest are given?
→
Giving reasons explain how the following are treated while estimating national income:
  1. Payment of fees to a lawyer engaged by a firm.
  2. Rent free house to an employee by an employer.
  3. Purchases by foreign tourists.
→
Calculate national income and gross national disposable income from the following data:
S.No.   (Rs. crores)
1 Current transfers by government. 15
2 Private final consumption expenditure. 400
3 Net current transfers from the rest of the world. 20
4 Government final consumption expenditure. 100
5 Net factor income from abroad. - 10
6 Net domestic capital formation. 80
7 Consumption of fixed capital. 50
8 Net exports. 40
9 Net indirect taxes. 60
→