introduction to macro economics section 2 MCQ Questions & Answers Detailed Explanation

Answer: (d)

Octroi is a local tax that is collected by the state government on those goods that have been bought into the city/state for the purpose of personal use and sale.

The charges on the items are generally levied after on the weight, value and a total number of goods. It is levied on certain articles, such as foodstuffs, on their entry into a city.

Answer: (c)

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.

Answer: (a)

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.

Answer: (a)

The gross national product is the sum total of all final goods and services produced by the people of one country in one year. The GNP is a flow concept. It can be calculated with either the expenditure approach or the income approach.

The expenditure approach sums all that is purchased: in a sense, it is equivalent to the income approach because purchases are only possible if income is present.

GDP can be calculated as the sum of all expenditures: personal consumption expenditure (C), gross private domestic investment (Ig), government purchases (G), and net exports (Xn).

An increase in the stock of unsold articles does not come under any of these heads.

Answer: (c)

The term investment multiplier refers to the concept that any increase in public or private investment spending has a more than proportionate positive impact on aggregate income and the general economy.

The investment multiplier tries to determine the financial impact of a public or private project.

Answer: (c)

An indifference curve is a locus of combinations of goods which derive the same level of satisfaction so that the consumer is indifferent to any of the combinations he consumes.

If a consumer equally prefers two product bundles, then the consumer is indifferent between the two bundles. The consumer gets the same level of satisfaction (utility) from either bundle.

In other words, an indifference curve is the locus of various points showing different combinations of two goods providing equal utility to the consumer.