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

Answer: (c)

Pump priming is the action taken to stimulate an economy, usually during a recessionary/deflationary period, through government spending, and interest rate and tax reductions.

Growth is accomplished through the increase in purchasing power experienced by those affected by the injection of funds, with the goal of promoting higher demand for goods and services.

Answer: (c)

Gilt-edged securities are bonds issued by governments. They are government securities, i.e., instruments issued by the government to borrow money from the market. Gilt-edged securities are a high-grade investment with very low risk.

Answer: (b)

When the national output is multiplied by the present ruling price, we obtain national income at current prices.

On the other hand, if the national output is multiplied by the base price if called national income at constant price. But what is seen is that prices of commodities go on changing. When the current outputs are multiplied by the current prices it will give rise to monetary national income.

So a very rise in National Income at current or constant prices does not indicate an increase in product or output but is rather due to the rise in the price level.

Answer: (d)

Economic progress of a country is determined by increase in per capita income of people of that country.

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.

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.