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

Answer: (c)

The figure of final private consumption expenditure includes the imputed gross rent of owner-occupied dwellings, consumption of own-account production and payment by households of wages and salaries in kind valued at cost, e.g., provision for food, shelter and clothing to the employees, wherever they exist.

Production for self-consumption is a part of the production and hence an income and is also a part of final consumption expenditure.

Answer: (c)

Such a scenario is seen in the case of primary economic activities such as agriculture in the developing countries like India. Most of the primary activities are labour intensive where the volume of manpower substitutes the lack of technology. Besides, farmers are ‘self-employed.’

Answer: (c)

There is a close relationship between marginal product and average product because both are derived from the total product. When marginal product is equal to average product, the average product is at its maximum.

In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the “cross-over point,”

when MP = AP, AP is at its maximum.

Answer: (a)

The classical economists’ belief in full employment as a normal condition of a free market economy is based on Say’s Law of Markets.

It was on the basis of this law that the classical economists thought that general overproduction and hence general unemployment were impossible. The law simply states “supply creates its own demand.”

Answer: (a)

Social Status is not a dimension of Human Development Index.

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.