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) flow of income
(b) distribution of income
(c) usage of income
(d) production of income
The correct answers to the above question in:
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.
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Read more introduction to macro economics Based Indian Economy Questions and Answers
Question : 1
Preparation of butter, ghee by a household for their own use is a part of :
a) industrial production
b) consumption
c) household capital formation
d) own-account production
Answer »Answer: (b)
- The processing of agricultural products;
- The production of grain by threshing;
- The production of flour by milling;
- The curing of skins and the production of leather;
- The production and preservation of meat and fish products;
- The preservation of fruit by drying, bottling, etc.;
- The production of dairy products such as butter or cheese;
- The production of beer, wine or spirits; the production of baskets and mats; etc,
comes under processing of primary commodities for own consumption.
Question : 2
According to Keynes, business cycles are due to variation in the rate of investment caused by fluctuations , in the
a) Marginal propensity to consumption
b) Marginal efficiency to investment
c) Marginal propensity to save
d) Marginal efficiency of capital
Answer »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.
Question : 3
An economy in which there are no flows of labour, goods or money to and from other nations is a/an
a) closed economy
b) open economy
c) mixed economy
d) slow economy
Answer »Answer: (a)
An economy that does not interact with the economy of any other country is known as a closed economy.
A closed economy is self-sufficient, meaning no imports are brought in and no exports are sent out. It is the opposite of an open economy, in which a country conducts trade with outside regions.
Question : 4
The method of calculating the national income by the product method is otherwise known as :
a) Expenditure method
b) Net output method
c) Value added method
d) Income method
Answer »Answer: (b)
Primarily there are three methods of measuring national income. Which method is to be employed depends on the availability of data and purpose. The methods are product method, income method and expenditure method.
According to the production method, the total value of final goods and services produced in a country during a year is calculated at market prices.
According to this method, only the final goods and services are included and the intermediary goods and services are not taken into account.
In this method, National Output = National Expenditure (Aggregate Demand) = National Income.
Question : 5
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 : 6
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.
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
introduction to macro economics section 6
Introduction to Macro Economics Shortcuts and Techniques with Examples
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