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

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: (b)

A transfer payment is a one-way payment of money for which no money, good, or service is received in exchange.

Governments use such payments as means of income redistribution by giving out money under social welfare programs such as social security, old age or disability pensions, student grants, unemployment compensation, etc.

Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses

Answer: (a)

According to Keynesian Theory of consumption, the current real disposable income is the most important determinant of consumption in the short run. It bases consumption on current income.

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.