introduction to macro economics section 6 Practice Questions Answers Test with Solutions & More Shortcuts

Answer: (a)

National income is the total value of a country’s final output of all new goods and services produced in one year.

Transfer payments are not a part of the national income so they are cut from national income to get n.n.p in order to arrive at national income such payments are bad debts incurred by banks, payments of pensions, charity, scholarships etc.

Private-sector transfers include charitable donations and prizes to lottery winners.

Answer: (b)

The Consumption function is a single mathematical function used to express consumer spending.

It was developed by John Maynard Keynes and detailed most famously in his book The General Theory of Employment, Interest, and Money.

It is made up of autonomous consumption that is not influenced by current income and induced consumption that is influenced by the economy's income level.

Answer: (d)

Pareto efficiency is said to occur when it is impossible to make one party better off without making someone worse off.

An inefficient situation is one where it is possible to make some people better off without making anyone else worse off.

Answer: (a)

Gross National Product (GNP) is the market value of all products and services produced in one year by labour and property supplied by the residents of a country.

Basically, GNP is the total value of all final goods and services produced within a nation in a particular year, plus income earned by its citizens (including income of those located abroad), minus income of non-residents located in that country.

GNP measures the value of goods and services that the country’s citizens produced regardless of their location.

Answer: (a)

The standard of living is a measure of the material welfare of the inhabitants of a country. The baseline measure of the standard of living is real national output per head of population or real GDP per capita.

This is the value of national output divided by the resident population. Other things being equal, a sustained increase in real GDP increases a nation’s standard of living providing that output rises faster than the total population.