introduction to macro economics section 5 MCQ Questions & Answers Detailed Explanation

Answer: (a)

Disposable income is total personal income minus personal current taxes (or plus receipts of the government).

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: (a)

The Gross Domestic Income (GDI) is the total income received by all sectors of an economy within a nation. It includes the sum of all wages, profits, and taxes, minus subsidies.

Since all income is derived from production (including the production of services), the gross domestic income of a country should exactly equal its gross domestic product (GDP).

Answer: (b)

Normal profit or economic profit is an economic condition occurring when the difference between a firm’s total revenue and the total cost is equal to zero. Simply put, normal profit is the minimum level of profit needed for a company to remain competitive in the market.

In a sense, normal profit is the same as net profit which is calculated by subtracting a company’s total expenses from total revenue, thus showing what the company has earned (or lost) in a given period of time.

Accounting profit occurs when revenues are greater than costs, and not equal, as in the case of normal profit.

Answer: (d)

Desired savings are kept equal to desired investment by responses to interest rate changes.

Savings identity or the savings-investment identity is a concept in National Income Accounting stating that the amount saved (S) in an economy will be the amount invested (I). This identity only holds true because investment here is defined as including inventories.

Thus, should consumers decide to save more, and spend less, the fall in demand would lead to an increase in business inventories. The change in inventories brings savings and investment into balance without any intention by the business to increase investment.

Answer: (c)

Consumers do one of two things with their disposable income: They save it or they spend it. So Income = Consumption + Saving.

Answer: (a)

The matrix method is a structural analysis method used as a fundamental principle in many applications in civil engineering. The method is carried out, using either a stiffness matrix or a flexibility matrix.

Primarily there are three methods of measuring national income. The methods are product method, income method and expenditure method.