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

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: (b)

The business cycle is the fluctuation in economic activity that an economy experiences over a period of time. It is basically defined in terms of periods of expansion or recession.

During expansions, the economy grows in real terms (i.e. excluding inflation), as evidenced by increases in indicators like employment, industrial production, sales and personal incomes.

During recessions, the economy contracts, as measured by decreases in the above indicators.

Answer: (a)

Social Status is not a dimension of Human Development Index.

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: (d)

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.

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.