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

Answer: (d)

Saving function is a mathematical relation between saving and income by the household sector.

This function captures the saving-income relation, the flip side of the consumption-income relation that forms one of the key building blocks for Keynesian economics.

Answer: (d)

Disapproval of Policy Cut seeks to reduce the amount of the demand be reduced to Re.1/-’ representing disapproval of the policy underlying the demand.

A member giving notice of such a motion shall indicate in precise terms the particulars of the policy which he proposes to discuss. The discussion shall be confined to the specific point or points mentioned in the notice and it shall be open to members to advocate an alternative policy.

Answer: (c)

Deficient demand refers to the situation when aggregate demand for goods and services falls short of aggregate supply of output which is produced by fully employing the given resources of the economy. This deficient demand leads to the decrease in output, employ-ment and prices in the econo-my.

According to Malthus, deficiency of demand could lead to stagnation in which both capital and labor are redundant relative to the opportunities for employing them profitably.

Answer: (c)

In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product.

The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry.

As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.

Answer: (b)

Transfer payment refers to a payment made by a public authority other than one made in exchange for goods or service produced.

Transfer payments are not part of the national income. Examples include Old age pensions, unemployment compensations, social security payments and child benefit.

Answer: (c)

Capital output ratio is the ratio of capital used to produce an output over a period of time.

This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output; hence the resulting capital output ratio is low.