introduction to macro economics section 1 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Demand-pull inflation is asserted to arise when aggregate demand in an economy outpaces aggregate supply. It involves inflation rising as real gross domestic product rises and unemployment falls, as the economy moves along the Phillips curve. This is commonly described as “too much money chasing too few goods.”

Answer: (d)

Income which is not produced by any production process is called Transfer Income.

Answer: (c)

Ragnar Frisch coined the widely-used term pair macroeconomics/microeconomics in 1933. He was a Norwegian economist and the co-recipient of the first Nobel Memorial Prize in Economic Sciences in 1969. He is known for having founded the discipline of econometrics.

Answer: (b)

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.

Answer: (b)

Effective Demand is "the demand in which the consumer is able and willing to purchase at conceivable price" simply saying if the product price is low more will buy, but if the rates go high then the quantity of the demand goes down.

Keynes used two terms: Aggregate Demand Function or Price and Aggregate Supply Function or Price to explain the determination of effective demand.

Answer: (c)

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.

It does not attempt to reflect the distribution of income or wealth. Per capita income is often used to measure a country’s standard of living.

However, it is not a good standard of measuring standard of living as it is the income of one person in the country.