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

Answer: (d)

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city.

It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.

It does not attempt to reflect the distribution of income or wealth. Per capita income is often used as average income, a measure of the wealth of the population of a nation, particularly in comparison to other nations.

It is usually expressed in terms of a commonly used international currency such as the Euro or United States dollar, and is useful because it is widely known, easily calculated from readily available GDP and population estimates, and produces a useful statistic for comparison.

Answer: (c)

Equilibrium Output refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy.

It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year.

According to the MR-MC approach, equilibrium refers to the stage of that output level at which,

Marginal Cost (MC) = Marginal Revenue (MR).

As long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more only when MC becomes equal to MR.

Answer: (d)

“Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes.

The rejection of this doctrine is a central component of The General Theory of Employment, Interest and Money (1936) and a central tenet of Keynesian economics.

Say’s Law (or Say’s Law of Markets), is often summarized as: “Aggregate supply creates its own aggregate demand”, “Supply creates its own demand”, “If you build it, they will come”, and Inherent in supply is the wherewithal for its own consumption”.

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: (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: (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.