introduction to macro economics section 3 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (c)

The figure of final private consumption expenditure includes the imputed gross rent of owner-occupied dwellings, consumption of own-account production and payment by households of wages and salaries in kind valued at cost, e.g., provision for food, shelter and clothing to the employees, wherever they exist.

Production for self-consumption is a part of the production and hence an income and is also a part of final consumption expenditure.

Answer: (c)

Such a scenario is seen in the case of primary economic activities such as agriculture in the developing countries like India. Most of the primary activities are labour intensive where the volume of manpower substitutes the lack of technology. Besides, farmers are ‘self-employed.’

Answer: (c)

There is a close relationship between marginal product and average product because both are derived from the total product. When marginal product is equal to average product, the average product is at its maximum.

In the short-run production function, since marginal product starts off as greater than average product and then falls below average product, we can assume that at the “cross-over point,”

when MP = AP, AP is at its maximum.

Answer: (d)

In economics, an inferior good is a good that decreases in demand when consumer income rises (or rises in demand when consumer income decreases), unlike normal goods, for which the opposite is observed.

Normal goods are those for which consumers’ demand increases when their income increases. Cheaper cars are examples of inferior goods.

Answer: (c)

Say’s law, or the law of market, is an economic principle of classical economics named after the French businessman and economist Jean-Baptiste Say (1767–1832), who stated that “products are paid for with products” and “a glut can take place only when there are too many means of production applied to one kind of product and not enough to another.