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

Answer: (a)

In the words of McConnell, the demand for factors of production is a derived demand that is derived from the finished goods and services which resources help to produce.

While the demand for goods is direct demand, demand for factors is derived from demand. It is based on the productivity of the factors.

Answer: (b)

Collective consumption is a concept that refers to the many goods and services that are produced and consumed on a collective level, such as in cities or countries.

These include schools, libraries, roads, bridges, public transportation, health care, welfare, fire and police protection, etc.

Answer: (a)

For the private corporate sector, retained profits adjusted for non-operating surplus/deficit is considered as its Net Saving.

Retained profits are those which are ploughed back into business after making commitments to depreciation provision for various fixed assets, debts, government and to share-holders.

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: (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: (b)

Consumer Sovereignty is one of the features of a free-market economy.

It refers to the assertion consumer preferences determine the production of goods and services. In a free market system, market performance is in fact responsive to the specific wants of the consumers within the system.