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

Answer: (d)

An indifference curve may be defined as the locus of points, each representing a different combination of two substitute goods, which yield the same utility or level of satisfaction to the consumer. Therefore, he is indifferent between any two combinations of goods when it comes to making a choice between them.

So if, for example, a consumer makes five combinations a, b, c, d and e of two substitute commodities, X and Y, all these combinations yield the same level of satisfaction indicated by U.

Answer: (b)

To find the real value of changes in output under inflationary conditions, the effects of any general price increase (price inflation) must be taken into account.

This is done by holding prices constant from a starting measure, called the base year. It holds prices constant in terms of the prices existing in the base year.

Answer: (b)

The services sector has the largest share in the GDP, accounting for 55% in 2007, up from 15% in 1950.

Industry accounts for 28% of the GDP and employs 14% of the total workforce. Agriculture and allied sectors like forestry, logging and fishing accounted for 15.7% of the GDP in 2009–10.

Answer: (b)

Consumer Sovereignty is one of the features of a free-market economy.

It refers to the assertion consumer preferences determine the production of goods and services. In a free market system, market performance is in fact responsive to the specific wants of the consumers within the system.

Answer: (a)

Net national product at market price is the market value of the output of final goods and services produced at the current price in one year of a country.

If we subtract the depreciation charges from the gross national product, we get the net national product at market price.

Net national product at market price = Gross national product at market price - Depreciation.