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

Answer: (d)

Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period of time. Per capita income or average income or income per person is the mean income within an economic aggregate, such as a country or city.

It is calculated by taking a measure of all sources of income in the aggregate (such as GDP or Gross National Income) and dividing it by the total population.

It does not attempt to reflect the distribution of income or wealth. Per capita income is often used as average income, a measure of the wealth of the population of a nation, particularly in comparison to other nations.

It is usually expressed in terms of a commonly used international currency such as the Euro or United States dollar, and is useful because it is widely known, easily calculated from readily available GDP and population estimates, and produces a useful statistic for comparison.

Answer: (c)

Equilibrium Output refers to the level of output where the Aggregate Demand is equal to the Aggregate Supply (AD = AS) in an economy.

It signifies that whatever the producers intend to produce during the year is exactly equal to what the buyers intend to buy during the year.

According to the MR-MC approach, equilibrium refers to the stage of that output level at which,

Marginal Cost (MC) = Marginal Revenue (MR).

As long as MC is less than MR, it is profitable for the producer to go on producing more because it adds to its profits. He stops producing more only when MC becomes equal to MR.

Answer: (d)

“Supply creates its own demand” is the formulation of Say’s law by John Maynard Keynes.

The rejection of this doctrine is a central component of The General Theory of Employment, Interest and Money (1936) and a central tenet of Keynesian economics.

Say’s Law (or Say’s Law of Markets), is often summarized as: “Aggregate supply creates its own aggregate demand”, “Supply creates its own demand”, “If you build it, they will come”, and Inherent in supply is the wherewithal for its own consumption”.

Answer: (b)

Supply of labour in an economy depends upon both economic as well as non-economic factors. It depends upon the size of population, the number of workers available for work out of a given population, the number of hours worked, the intensity of work, the skills of workers, their willingness to work and the mobility of labour.

Answer: (a)

Capacity utilisation refers to the extent or level to which the productive capacity of a plant, firm, or country is used in generation of goods and services. Expressed usually as a percentage, it is computed by dividing the total capacity with the portion being utilized.