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

MOST IMPORTANT indian economy mcq - 6 EXERCISES

Top 30,000+ Indian Economy Memory Based Exercises

The following question based on Introduction to Macro Economics topic of indian economy mcq

Questions : Net National Product of a country is

(a) GNP minus net income from abroad

(b) GNP minus depreciation allowances

(c) GDP plus net income from abroad

(d) GDP minus depreciation allowances

The correct answers to the above question in:

Answer: (b)

Net national product (NNP) is the total market value of all final goods and services produced by residents in a country or other polity during a given time period (gross national product or GNP) minus depreciation.

The net domestic product (NDP) is the equivalent application of NNP within macroeconomics, and NDP is equal to gross domestic product (GDP) minus Depreciation:

NDP = GDP - Depreciation.

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Read more introduction to macro economics Based Indian Economy Questions and Answers

Question : 1

Rate of interest is determined by

a) Liquidity preference

b) Commercial Banks

c) Central Government

d) The rate of return on the capital invested

Answer: (b)

Bank Rate is determined by the Reserve Bank of India. The rate of interest is determined by the commercial banks in India.

As per RBI notification, banks are free to determine rates of interest subject to BPLR and spread guidelines. Banks may, however, offer loans at below BPLR to exporters or other creditworthy borrowers including public enterprises based on a transparent and objective policy approved by their Boards.

Question : 2

Consumption function expresses the relationship between consumption and

a) investment

b) price

c) income

d) savings

Answer: (c)

The consumption function is a mathematical formula laid out by famed economist John Maynard Keynes.

The formula was designed to show the relationship between real disposable income and consumer spending, the latter variable being what Keynes considered the most important determinant of short-term demand in an economy.

Question : 3

National income accounting is the study of the income and expenditure of the entire

a) economy

b) organisation

c) state

d) family

Answer: (a)

National Income Accounting is a set of principles and methods used to measure the income and production of a country.

There are basically two ways of measuring national economic activity:

  1. as the money value of the total production of goods and services during a given period (usually a year) or
  2. as the total of incomes derived from economic activity after allowance has been made for capital consumption.

Question : 4

The main feature of a capitalist economy is

a) Economic planning

b) Private ownership

c) Public ownership

d) Administered prices

Answer: (b)

Capitalism is an economic system that is based on private ownership of the means of production and the production of goods or services for profit.

Other elements central to capitalism include capital accumulation and often competitive markets.

Question : 5

The total value of goods and services produced in a country during a given period is

a) Per capita income

b) Net national income

c) National income

d) Disposable income

Answer: (c)

National income is the total value a country’s final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macroeconomics.

Question : 6

What happens when there is a demand deficiency in an economy?

a) Recession

b) Inflation

c) Stagnation

d) Poverty

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.

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