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

Answer: (a)

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.

Net national product at market price = Gross national product at market price - Depreciation.

Answer: (a)

In economics, a multiplier is a factor of proportionality that measures how much endogenous variable changes in response to a change in some exogenous variable. For example, suppose a one-unit change in some variable x causes another variable y to change by M units.

Then the multiplier is M. In monetary macroeconomics and banking, the money multiplier measures how much the money supply increases in response to a change in the monetary base.

The multiplier may vary across countries, and will also vary depending on what measures of money are considered. For example, consider M2 as a measure of the U.S. money supply, and M0 as a measure of the U.S. monetary base.

If a USD1 increase in M0 by the Federal Reserve causes M2 to increase by $10, then the money multiplier is 10.

Answer: (b)

Gross National Product (GNP) is defined as “the market value of all goods and services produced in one year by labour and property supplied by the residents of a country.”

It is contrasted to Gross domestic product (GDP), defined as “the value of all final goods and services produced in a country in 1 year.”

Answer: (b)

The services sector has the largest share in the GDP, accounting for 55% in 2007, up from 15% in 1950.

Industry accounts for 28% of the GDP and employs 14% of the total workforce. Agriculture and allied sectors like forestry, logging and fishing accounted for 15.7% of the GDP in 2009–10.

Answer: (b)

To find the real value of changes in output under inflationary conditions, the effects of any general price increase (price inflation) must be taken into account.

This is done by holding prices constant from a starting measure, called the base year. It holds prices constant in terms of the prices existing in the base year.

Answer: (d)

An indifference curve may be defined as the locus of points, each representing a different combination of two substitute goods, which yield the same utility or level of satisfaction to the consumer. Therefore, he is indifferent between any two combinations of goods when it comes to making a choice between them.

So if, for example, a consumer makes five combinations a, b, c, d and e of two substitute commodities, X and Y, all these combinations yield the same level of satisfaction indicated by U.