introduction to macro economics section 4 MCQ Questions & Answers Detailed Explanation

Answer: (a)

Economic activity, is quite simply, the activity of the economy. It includes the growth and shrinkage of the economy and all factors that affect this (for example Aggregate Expenditure).

It is commonly measured by the GDP (Gross Domestic Product) which is probably one of the most reliable economic indicators.

A teacher teaching his daughter at home is an example of a non-economic activity.

Answer: (c)

“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 the law of the market is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767– 1832), who stated that “products are paid for with products” and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another

Answer: (b)

Disposable income is total personal income minus personal current taxes. In national accounts, definitions, personal income, minus personal current taxes equals disposable personal income.

Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.

Answer: (c)

Gross national product (GNP) is the market value of all products and services produced in one year by labour and property supplied by the residents of a country.

It is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.

Answer: (b)

National income is the total value of a country’s final output of all new goods and services produced in one year.

So the construction of a new house is certainly output of goods. Transfer payments are not a part of the national income.

So private sector transfers including charitable donations and prizes to lottery winners are excluded from it.

Answer: (b)

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. Measurement of personal income is the best measure of the economic well-being of individuals and nations.

Besides, it helps to show the level of inequality in a society or country.