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

Answer: (d)

Macroeconomics involves the sum total of economic activity, dealing with the issues such as the production of national income, growth, inflation, and unemployment.

It is all about is about maximizing national income and growth.

Answer: (b)

1. The processing of agricultural products;
2. The production of grain by threshing;
3. The production of flour by milling;
4. The curing of skins and the production of leather;
5. The production and preservation of meat and fish products; 
6. The preservation of fruit by drying, bottling, etc.;
7. The production of dairy products such as butter or cheese;
8. The production of beer, wine or spirits; the production of baskets and mats; etc,

comes under processing of primary commodities for own consumption.

Answer: (d)

According to Keynes’ ‘General Theory of Employment, Interest and Money,’ business cycles are caused by variations in the rate of investment which are caused by fluctuations in the marginal efficiency of capital.

Marginal efficiency of capital means the expected profits from new investments.

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.

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: (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,