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

Answer: (c)

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

Answer: (d)

The primary sector of the economy is the sector of an economy making direct use of natural resources. This includes agriculture, forestry, fishing, mining, and extraction of oil and gas.

Answer: (c)

Investment expenditure refers to the expenditure incurred either by an individual or a firm or the government for the creation of new capital assets like machinery, building etc.

Business inventories are goods that firms produce in one time period with the intent to sell later and they are counted as part of business investment. The purchase of a house cannot be considered an investment expenditure as it may be for personal use.

Answer: (b)

The price of a commodity is always determined by the forces of demand and supply in the market.

The price at which the amount demanded and the amount supplied are equal is known as ‘equilibrium price.’

The equilibrium price definitely increases when there is an increase in demand combined with a decrease in supply.

Answer: (a)

Dadabhai Naoroji prepared the first estimates of National income in 1876. He estimated the national income by first estimating the value of agricultural production and then adding a certain percentage as nonagricultural production.

However, such a method can only be called a non-scientific method. The first person to adopt a scientific procedure in estimating the national income was Dr VKRV Rao in 1931.

Answer: (d)

In economics, marginal cost is the change in the total cost that arises when the quantity produced is incremented by one unit.

That is, it is the cost of producing one more unit of a good. Marginal cost is independent of the fixed cost and depends on the changes in the variable factors.

Since fixed costs do not change with output, there are no marginal fixed costs when output is increased in the short run.

It is only the variable costs that vary with output in the short run. Therefore, the marginal costs are in fact due to the changes in variable costs, and whatever the amount of fixed cost, the marginal cost is unaffected by it.