introduction to macro economics section 3 MCQ Questions & Answers Detailed Explanation
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The following question based on Introduction to Macro Economics topic of indian economy mcq
(a) Liquidity/Borrowing constraint
(b) High interest rate
(c) Welfare programmes
(d) Low per capita income
The correct answers to the above question in:
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).
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Read more introduction to macro economics Based Indian Economy Questions and Answers
Question : 1
Depreciation is equal to —
a) Gross national product — Personal income
b) Personal income — Personal taxes
c) Net national product — Gross national product
d) Gross national product — Net national product
Answer »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,
Question : 2
The market equilibrium for a commodity is determined by:
a) The intervention of the Government.
b) The market demand of the commodity.
c) The balancing of the forces of demand and supply for the commodity
d) The market supply of the commodity.
Answer »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.
Question : 3
According to Keynesian theory of income determination, at full employment, a fall in aggregate demand causes
a) a rise in real gross National product and investment
b) a rise in prices of output and resources
c) a fall in real gross National product and employment
d) a fall in prices of output and resources
Answer »Answer: (d)
In 1936, John Maynard Keynes published the book “The General Theory of Employment, Interest and Money to explain the prolonged and massive unemployment in the Great Depression.
The book criticises the classical model. Keynes turns Say’s Law on its head, arguing that aggregate demand determines national output and employment in the economy.
In this sense, demand creates its own supply. Unlike the Classical economists, Keynes believes that prices and wages are rigid, especially in the downward direction and hence the economy is not a self-correcting mechanism.
In other words, Keynes believes that as prices and wages are rigid, the economy can stay at a below-full-employment equilibrium. Suppose that the economy is at the full-employment equilibrium.
Further, suppose that aggregate demand falls. When this happens, the national output will fall below the full-employment level which will lead to unemployment resulting in downward pressure on wages.
Question : 4
Capacity utilisation
a) is a measure of the proportional of the existing capital stock used for current production.
b) rises as the economy moves into a recession, since firms must replace unemployed workers with some other resources to maintain production.
c) represents the percent of the labour force that is employed.
d) is usually near 100 percent.
Answer »Answer: (a)
Capacity utilisation refers to the extent or level to which the productive capacity of a plant, firm, or country is used in generation of goods and services. Expressed usually as a percentage, it is computed by dividing the total capacity with the portion being utilized.
Question : 5
The supply of labour in the market depends on
a) the size of population
b) All the above
c) the number of person hours put in by each person
d) the proportion of the population in the labour force
Answer »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.
Question : 6
“Supply creates its own demand” – Who said this ?
a) J. M. Keynes
b) Senior
c) J. S. Mill
d) J. B. Say
Answer »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”.
GET Introduction to Macro Economics PRACTICE TEST EXERCISES
introduction to macro economics section 1
introduction to macro economics section 2
introduction to macro economics section 3
introduction to macro economics section 4
introduction to macro economics section 5
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