introduction to macro economics section 4 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (a)

According to Keynesian Theory of consumption, the current real disposable income is the most important determinant of consumption in the short run. It bases consumption on current income.

Answer: (a)

Economic activity, is quite simply, the activity of the economy. It includes the growth and shrinkage of the economy and all factors that affect this (for example Aggregate Expenditure).

It is commonly measured by the GDP (Gross Domestic Product) which is probably one of the most reliable economic indicators.

A teacher teaching his daughter at home is an example of a non-economic activity.

Answer: (c)

“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 the law of the 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

Answer: (b)

Disposable income is total personal income minus personal current taxes. In national accounts, definitions, personal income, minus personal current taxes equals disposable personal income.

Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.

Answer: (b)

A transfer payment is a one-way payment of money for which no money, good, or service is received in exchange.

Governments use such payments as means of income redistribution by giving out money under social welfare programs such as social security, old age or disability pensions, student grants, unemployment compensation, etc.

Examples of certain transfer payments include welfare (financial aid), social security, and government making subsidies for certain businesses