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

Answer: (c)

Inventory refers to raw materials, work-in-process goods and completely finished goods that are considered to be the portion of a business’s assets that are ready or will be ready for sale.

Inventory represents one of the most important assets that most businesses possess because the turnover of inventory represents one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders/owners.

Answer: (d)

Keynesian Economics is an economic theory of total spending in the economy and its effects on output and inflation. It emphasizes that government expenditures (or tax cuts) leads to increase in GDP which is a multiple of the original expenditure.

Answer: (b)

Marginal Utility = Change in Total Utility / Change in number of Units consumed.

The first component of the formula is to calculate the change in total utility. The second component of the marginal utility formula is the change in the number of units that have been consumed.

This is done by subtracting the number that is currently being consumed from a previously consumed amount.

So, Marginal Utility (MU) from 10th Unit = TU₁₀ - TU₉

= 15 – 20= –5

Answer: (d)

Internal economies are those economies in production—those reductions in production costs—which accrue to the firm itself when it expands its output or enlarges its scale of production.

The internal economies arise within a firm as a result of its own expansion independent of the size and expansion of the industry as a whole.

Answer: (d)

Demand refers to how much (quantity) of a product or service is desired by buyers.

The quantity demanded is the amount of a product people are willing to buy at a certain price; the relationship between price and quantity demanded is known as the demand relationship.

So for demand to originate, a product is required first.

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.