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

Answer: (c)

A capital gain is a profit that results from a disposition of a capital asset, such as stock, bond or real estate, where the amount realised on the disposition exceeds the purchase price. The gain is the difference between a higher selling price and a lower purchase price.

Capital gains may refer to "investment income" that arises in relation to real assets. In other words, a capital gain represents an appreciation in value accruing over a prescribed period of time on the asset.

Answer: (a)

In economics, the Lorenz curve is a graphical representation of the distribution of income or of wealth. It was developed by Max O.

Lorenz in 1905 for representing inequality of the wealth distribution.

On the graph, a straight diagonal line represents perfect equality of wealth distribution; the Lorenz curve lies beneath it, showing the reality of wealth distribution.

Answer: (d)

The volume of investment depends upon the following two factors:

1. rate of interest; and
2. marginal efficiency of capital.

Before investing the money a businessman compares interest with the rate of marginal efficiency capital. If they expect that rate of profit will be greater than the rate of interest, then they invest the money otherwise not. The expected rate of return on capital is called the marginal efficiency of capital.

In other words, the marginal efficiency of capital is a return on investment which is based partly on expectations of future yields and partly on the actual price of the capital good concerned.

Answer: (a)

Net national product at market price is the market value of the output of final goods and services produced at the current price in one year of a country.

If we subtract the depreciation charges from the gross national product, we get the net national product at market price.

Answer: (b)

The tertiary sector or service sector is the third of the three economic sectors of the three-sector theory.

The others are the secondary sector (manufacturing), and the primary sector (agriculture). Tertiary activities are service-based and give non-tangible value to customers such as the provision of services, trading, etc.

Answer: (b)

Barter is a system of exchange where goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money.

Barter, as a replacement for money as the method of exchange, is used in times of monetary crisis, such as when the currency may be either unstable or simply unavailable for conducting commerce.