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

Answer: (c)

As a general rule, saving is considered as a derivative of consumption. Developed economies have lower saving rates than developing countries because at the same income level, the level of consumption is higher in their cases.

Besides, as seen in the recent case of the United States, welfare programmes have been found to be responsible for falling saving rates.

Redistributing from young and future generations to older generations raises national consumption and lower national saving (The Concise Encyclopedia of Economics).

Answer: (d)

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.

So, Depreciation = Gross National ProductNet National Product,

Answer: (c)

Market Equilibrium is determined when the quantity demanded of a commodity becomes equal to the quantity supplied.

The price determined corresponding to market equilibrium is known as equilibrium price and the corresponding quantity is known as equilibrium quantity.

Answer: (b)

Supply of labour in an economy depends upon both economic as well as non-economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.

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: (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.