Practice Introduction to macro economics - indian economy mcq Online Quiz (set-1) For All Competitive Exams

If we subtract the depreciation charges from the gross national product, we get net national product at market price. Net national product at market price=Gross national product at market price-Depreciation.

Marginal Utility = Change in Total Utility / Change in number of Units consumed.

The first component of the formula is to calculate the change in total utility. The second component of the marginal utility formula is the change in the number of units that have been consumed.

This is done by subtracting the number that is currently being consumed from a previously consumed amount.

So, Marginal Utility (MU) from 10th Unit = TU₁₀ - TU₉

= 15 – 20= –5

Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city.

It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population. Measurement of personal income is the best measure of the economic well-being of individuals and nations.

Besides, it helps to show the level of inequality in a society or country.

Gross National Product (GNP) is defined as “the market value of all goods and services produced in one year by labour and property supplied by the residents of a country.”

It is contrasted to Gross domestic product (GDP), defined as “the value of all final goods and services produced in a country in 1 year.”

Good is any tangible item, whether produced or found naturally and which is available for exchange. A free good is a good that is so abundant in supply that it has no opportunity cost, for example, air.

Intermediary good is a firm’s product that is used as an input into the production process of either the same firm or another.

J.M. Keynes’s magnum opus, ‘The General Theory of Employment, Interest and Money’ is often viewed as the foundation of modern macroeconomics.

Macroeconomics deals with the performance, structure, behaviour, and decision-making of an economy as a whole, rather than individual markets.

The terms microeconomics and macroeconomics were coined by Professor Ragnar Frisch of Oslo University for the first time in 1933 and since then they have gained popularity and were widely used by other economists. Now they have become an integral part of economic terminology.

Ragnar Anton Kittil Frisch was a Norwegian economist and the co-winner with Jan Tinbergen of the first Nobel Memorial Prize in Economic Sciences in 1969. Frisch was one of the founders of economics as modern science.

He made a number of significant advances in the field of economics and coined a number of new words.

The term depreciation represents a loss or diminution in the value of an asset consequent upon wear and tear, obsolescence, effluxion of time or permanent fall in market value. Physical deterioration of an asset is caused by movement, strain, friction, erosion etc.

For instance, building, machinery, furniture, vehicles, plant etc. Wear and tear is the general but primary cause of depreciation.

A superior good is a product that people demand more of as then their incomes grow. These are products that are generally more expensive and rarer like diamonds and classic cars.

Such a good must possess two economic characteristics: it must be scarce, and, along with that, it must have a high price.

Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty.

Depreciation refers to two very different but related concepts: the decrease in value of assets (fair value depreciation), and the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching principle).

The difference between the GNP and NNP is equal to capital depreciation. It is the wearing out, breaking down, or technological obsolescence.

Supply of labour in an economy depends upon both economic as well as non-economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.

Bank Rate is determined by the Reserve Bank of India. The rate of interest is determined by the commercial banks in India.

As per RBI notification, banks are free to determine rates of interest subject to BPLR and spread guidelines. Banks may, however, offer loans at below BPLR to exporters or other creditworthy borrowers including public enterprises based on a transparent and objective policy approved by their Boards.

According to the classical view, the rate of interest is determined by the interaction of the supply of and demand for capital.

Thus this theory is popularly called the demand and supply theory of the rate of interest. The supply of money together with the liquidity preference curve in theory interact to determine the interest rate at which the quantity of money demanded equals the quantity of money supplied.

According to Keynes, interest is the price paid for surrendering their liquid assets. Greater the liquidity preference higher shall be the rate of interest. The liquidity preference constitutes the demand for money.

According to Keynes, money is demanded because of three motives -transaction, precautionary and speculative.

The first two motives provide a yield of convenience and certainty. The third motive provides money yield. Keynes has termed the demand for money as liquidity preference.

In developed countries, the labour productivity of any commercial agriculture is high, so only a very small percentage of the population is involved with agriculture even when agriculture is a major industry and export.

These countries focus more on the manufacturing and service industries. Agriculture or the primary sectors of the economy have sizeable contributions to the GDP of developing nations.

The elasticity of demand, also known as price elasticity of demand, is the degree of responsiveness of demand to a change in price.

Its measure depends upon comparing the percentage change in the price with the resultant percentage change in the quantity demanded.

Thus, the elasticity of demand is the ratio of percentage change in the amount demanded to a percentage change in price.

According to Keynes’ ‘General Theory of Employment, Interest and Money,’ business cycles are caused by variations in the rate of investment which are caused by fluctuations in the marginal efficiency of capital.

Marginal efficiency of capital means the expected profits from new investments.

Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city.

It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.

When the national output is multiplied by the present ruling price, we obtain national income at current prices.

On the other hand, if the national output is multiplied by the base price if called national income at constant price. But what is seen is that prices of commodities go on changing. When the current outputs are multiplied by the current prices it will give rise to monetary national income.

So a very rise in National Income at current or constant prices does not indicate an increase in product or output but is rather due to the rise in the price level.