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

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: (c)

Liquidity preference refers to the demand for money, considered as liquidity. The concept was first developed by John Maynard Keynes in his book The General Theory of Employment, Interest and Money (1936).

It is the desire to hold money rather than other assets, in Keynesian theory based on motives of transactions, precaution, and speculation.

Answer: (a)

The income approach equates the total output of a nation to the total factor income received by residents or citizens of the nation. Transfer incomes are excluded from national income.

Therefore, wages of labourers will be included, pensions of retired workers will be excluded from national income.

Labour income includes compensations in kind. Non-labour income includes dividends, undistributed profits of corporations before taxes, interest, rent, royalties, profits of non-incorporated enterprises and of government enterprises.

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.