introduction to macro economics section 3 MCQ Questions & Answers Detailed Explanation

Answer: (c)

Excise duty is a tax on manufacture or production of goods. Excise duty on alcohol, alcoholic preparations, and narcotic substances is collected by the State Government and is called “State Excise” duty. The Excise duty on rest of goods is called “Central Excise” duty.

Answer: (a)

Domestic Product is the ross money value of all final goods and services produced in the domestic territory of a country during a year.

National Product is the gross money value of all final goods and services produced by the normal residents of a country during a year. It includes net factor income from abroad.

Answer: (b)

Since 1955 the national income estimates are being prepared by Central Statistical Organization.

The CSO uses different methods like the Product Method, Income Method and Expenditure method for various sectors in the process of estimating the National Income.

Answer: (d)

Intermediate consumption is an accounting flow that consists of the total monetary value of goods and services consumed or used up as inputs in production by enterprises, including raw materials, services and various other operating expenses.

Intermediate consumption (unlike fixed assets) is not normally classified in national accounts by type of good or service, because the accounts will show net output by sector of activity.

Because this value must be subtracted from Gross Output to arrive at GDP, how it is exactly defined and estimated will importantly affect the size of the GDP estimate.

Answer: (b)

Interest rates increase the cost of borrowing, which results in lesser investment activity and the purchase of consumer durables.

In a low interest-rate environment, shares become a more attractive buy, raising households’ financial assets. This may also contribute to higher consumer spending, and makes companies’ investment projects more attractive.

Lower interest rates also tend to cause currencies to depreciate: Demand for domestic goods rises when imported goods become more expensive. All of these factors raise output and employment as well as investment and consumer spending.

Answer: (c)

In economics, the backward bending supply curve is related to labour.

Also known as the backwards-bending supply curve of labour, This curve models a situation where workers choose to substitute leisure time for work time, i.e. wages, thus reducing the pool of labour available.

It shows how the change in real wage rates affects the number of hours worked by employees.