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

Answer: (d)

In his 1798 work, An Essay on the Principle of Population, Malthus examined the relationship between population growth and resources and developed the Malthusian theory of population growth.

He proposed that human populations grow exponentially (i.e., doubling with each cycle) while food production grows at an arithmetic rate (i.e. by the repeated addition of a uniform increment in each uniform interval of time).

Answer: (c)

Laissez Faire is an economic theory from the 18th century that is strongly opposed to any government intervention in business affairs.

Sometimes it is referred to as “let it be economics.” It is an economic environment in which transactions between private parties are free from tariffs, government subsidies, and enforced monopolies, with only enough government regulations sufficient to protect property rights against theft and aggression.

Answer: (c)

Capital output ratio is the ratio of capital used to produce an output over a period of time.

This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output; hence the resulting capital output ratio is low.

Answer: (b)

Transfer payment refers to a payment made by a public authority other than one made in exchange for goods or service produced.

Transfer payments are not part of the national income. Examples include Old age pensions, unemployment compensations, social security payments and child benefit.

Answer: (c)

In perfect competition, the existence of a large number of firms producing and selling the product ensures that an individual firm exercises no influence over the price of the product.

The output of an individual firm constitutes a very small fraction of the total output of the whole industry so that any increase or decrease in output by an individual firm has a negligible effect on the total supply of product of the industry.

As a result, a single firm is not in a position to influence the price of the product by the increasing or reducing its output.