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

Answer: (a)

Inflationary price rise is harmful to a country’s economic performance and to the welfare of its citizens. It can create a random redistribution of income given that inflation does not have an equal impact on individuals and groups.

The balance of payments may deteriorate because domestic inflation stimulates import spending, given that imports appear relatively cheaper, and dampens export sales.

A continuous price rise can be an obstacle to development as it has an adverse effect on saving and investment and causes a fall in growth.

Answer: (a)

Selling costs are the expenses on an advertisement, salesmanship, free sampling, free service, door-to door canvassing, and so on.

There is no selling problem under perfect competition where the product is homogeneous. Under monopolistic competition where the product is differentiated, selling costs are essential to push up the sales.

They are incurred to persuade a buyer to purchase one product in preference to another.

Answer: (a)

National income is the total value of a country’s final output of all new goods and services produced in one year.

Transfer payments are not a part of the national income so they are cut from national income to get n.n.p in order to arrive at national income such payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc.

Private-sector transfers include charitable donations and prizes to lottery winners.

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: (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: (b)

In economics, the average propensity to consume (APC) is defined as the ratio of aggregate or total consumption to aggregate income in a given period of time.

Thus, the value of average propensity to consume, for any income level, may be found by dividing consumption by income.