introduction to macro economics section 2 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Macro Economics topic of indian economy mcq
(a) Currency with the public is more than the deposits with the banks.
(b) Currency with the public is almost equal to the deposits with banks.
(c) Currency with the public is less than the deposits with the banks.
(d) Currency with the public is inconvertible only.
The correct answers to the above question in:
Answer: (c)
Money supply in India includes the following:
- Currency with the public;
- Demand deposits and time deposits with banks;
- Deposits with Reserve Bank of India; and
- Deposits in Post Office.
The currency with the public is less than the total currency issued by RBI. This is because of cash reserves with banks, i.e., a part of currency issued remains with banks.
As far as deposits are concerned, during the last four decades, the proportion of demand deposits, time deposits and others with banks in relation to the total supply of money has been increasing with reciprocal diminution in currency held by the public.
This is mainly due to the expansion of banking facilities in the country. Almost all the money in the economy exists as bank deposits – and banks create these deposits simply by making loans.
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Read more introduction to macro economics Based Indian Economy Questions and Answers
Question : 1
Personal disposable income is :
a) equal to personal income minus direct taxes paid by household.
b) equal to personal income minus indirect taxes.
c) always more than personal income.
d) always equal to personal income.
Answer »Answer: (a)
Disposable income is total personal income minus personal current taxes. In national accounts definitions, personal income, minus personal current taxes equals disposable personal income.
Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.
Question : 2
Equilibrium price in the market is determined by the
a) equality between average cost and average revenue.
b) equality between marginal cost and marginal revenue.
c) equality between total cost and total revenue.
d) equality between marginal cost and average cost.
Answer »Answer: (b)
The equilibrium price is the market price where the quantity of goods supplied is equal to the quantity of goods demanded.
This is the point at which the demand and supply curves in the market intersect. Both under perfect competition and monopolistic competition, the firm is in equilibrium at the point of equality of marginal cost and marginal revenue.
(MC = MR).
Question : 3
Which of the following is deducted from GNP to arrive at NNP ?
a) Tax
b) Subsidy
c) Interest
d) Depreciation
Answer »Answer: (d)
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.
Question : 4
‘Galloping Inflation’ is also known as
a) Hyper Inflation
b) Creeping Inflation
c) Running Inflation
d) Walking Inflation
Answer »Answer: (a)
When prices rise between 20% to 100% per annum or even more, it is called galloping or hyperinflation. Such a situation brings a total collapse of the monetary system because of the continuous fall in the purchasing power of money.
Galloping inflation has an adverse effect on middle and low-income groups in society.
GET Introduction to Macro Economics PRACTICE TEST EXERCISES
introduction to macro economics section 1
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