introduction to macro economics section 6 MCQ Questions & Answers Detailed Explanation

Answer: (c)

National income is the monetary value of all goods and services produced by nationals of a country. Only productive activities are included in the computation of national income.

All incomes earned through productive activities are included in national income. Income earned through unproductive activities is not included.

Answer: (d)

The price mechanism is an economic term that refers to the manner in which the prices of commodities affect the demand and supply of goods and services.

It is essentially a feature of market-driven or capitalist economic systems. It is based on the principle that only by allowing prices to move freely will the supply of any given commodity match demand.

Answer: (c)

In microeconomics, an Engel curve describes how household expenditure on a particular good or service varies with household income.

The curve is named after the German statistician Ernst Engel (1821–1896), who was the first to investigate this relationship between goods expenditure and income systematically in 1857.

Answer: (a)

The standard of living is a measure of the material welfare of the inhabitants of a country. The baseline measure of the standard of living is real national output per head of population or real GDP per capita.

This is the value of national output divided by the resident population. Other things being equal, a sustained increase in real GDP increases a nation’s standard of living providing that output rises faster than the total population.

Answer: (a)

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

Basically, GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.

GNP measures the value of goods and services that the country’s citizens produced regardless of their location.

Answer: (d)

Pareto efficiency is said to occur when it is impossible to make one party better off without making someone worse off.

An inefficient situation is one where it is possible to make some people better off without making anyone else worse off.