MACRO ECONOMICS

B.COM (H)- 202

QUESTION BANK

1. Excess demand for money, according to Say’s law in the Economy:

(A) Is greater

(B) Is very less

(D) There is no relationship between excess demand for money and Say’s Law

2. Which of the following is not an assumption of classical theory?

(A) Price flexibility (B) Unemployment

3. In classical theory the equality between saving and investment is brought about by:

(A) Rate of interest (B) Income

4. The normal condition of a capitalist economy in classical theory is:

(A) Underemployment	(B) Full employment
(C) General unemployment 5. Equation of exchange is associated with:	(D) Frictional unemployment
(A) Pigou	(B) J.B.Say
(C) Marshall	(D) Irving Fisher

6. The theory explaining the direct relationship between the price level and quantity of money is known as :

(A) Quantity theory of money (B) Say’s law of markets

7. In classical theory the level of employment is a function of:

(A) Price level (B) Money wage rate

8. Equation of exchange is converted into the quantity theory of money by assuming the following variables as constants:

(A) V and T

(B) M and V

(D) V and P

9. Which of the following is not an obstacle to full employment in classical theory?

(A) Excess of saving over investment

(B) Liquidity trap

(D) Wage Flexibility

10. Fisher’s Equation of quantity theory states that :

(A) P varies directly with income (B) P varies directly with M

11. The classical economists believed that the demand for labour is a function of:

(A) Total money wages (B) Money wage rate

12. In classical theory of employment, there is the possibility of:

(A) Voluntary unemployment (B) No unemployment

13. The idea that a general cut in wages will finally lead to a state of full employment was suggested by :

(A) Keynes		(B)	Marshall
(C) J.B.Say		(D)	A.C.Pigou

14. Say’s law of market says:

(A) Supply creates its own demand

(B) Demand creates supply (C) Income generates demand

(D) Savings create demand

15. The aggregate production function implied under classical theory is :

(A) Long run (B) Short run

16. In the Cambridge equation of M = kPR, the value of k is:

(A) M/V (B) 1/V

17. As a result of an increase in capital, ceteris paribus, ------ the marginal productivity of labour:

(A) Remains constant (B) Increase

18. In the classical theory, one of the following is an important assumption:

(A) Wages and prices are inflexible

(B) There is full employment

(D) Adjustment is through quantity.

19. In the Fisher’s extended equation of exchange M^IV^I represents:

(A) Credit money (B) Primary money

20. In Fisher’s transaction velocity model, one of the following is not an assumption:

(A) Velocity of circulation of money is constant

(B) The volume of transactions is constant

(D) P is considered as an active factor

21. The cash balance equation M = KPO was given by:

(A) Keynes (B) Pigou

22. “Supply creates its own demand “is a law of:

(A) Investment (B) Inflation

23. In the equation MV+ M^IV^I= PT, ‘M ‘denotes:

(A) Velocity of money (B) Money in circulation

24. I classical demand for money, the relationship between money supply and price level is:

(A) Proportional

(B) Non-proportional

(D) None of these

25. As per classical theory saving is:

(A) An increasing function of rate of interest

(B) Decreasing function of rate of interest

(D) None of these

26. The Cambridge version of the quantity theory of money was developed by:

(A) Fisher (B) Alfred Marshall

27. In classical system which of the following keeps the economy at full employment:

(A) Level of saving (B) Increase in money supply

28. In Fisher’s equation of exchange MV=PT, the variation of which produces a proportional change in price:

(A) M (B) V (C) P (D) T

29. According to classical economists, variations in savings are due to:

(A) Level of investment (B) Rate of interest

30. In classical theory which of the following is found in the economy:

(A) Unemployment (B) Involuntary unemployment

31. In MV=PT, if M doubles and V and T remain constant, then P will:

(A) Double (B) 1/2 (C) 1 (D) 4

32. Pigou’s version of Cambridge equation is:

(A) M = KP/Y (B) P= KR/M

33. The quantity theory of money was restated by:

(A) Alfred Marshall (B) Milton Friedman

34. The law which states that supply creates its own demand and overproduction is impossible is known as:

(A) The law of supply (B) Say’s law of market

35. Wages and prices do not adjust quickly to restore general equilibrium is a property of

(A) Classical economics	(B) Keynesian economics
(C) Monetary economics 36. Classicals treated money as a:	(D) Supply side economics
(A) Medium of exchange	(B) Store of value
(C) Both	(D) None

37. When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:

(A) Leftward (B) Rightward

38. An Economic model is a statement of relationship among economic ------

(A) Variables (B) Phenomena

39. LM curve shows the equilibrium condition in ---------- market

(A) Goods market (B) Product market

40. Supply creates its own demand is the Basis of:

(A) Classical economics	(B) Keynesian economics
(C) Monetarism 41. The simplest ISLM model consists of:	(D) None of these
(A) Two markets	(B) Three markets
(C) Four markets	(D) Five markets

42. The equilibrium in the product market is represented by which curve?

(A) IS (B) LM

43. The IS curve has a ------slope
(A) Positive	(B) Negative
(C) Zero 44. The LM curve has a ----- slope	(D) None of these
(A) Positive	(B) Negative
(C) Zero 45. ISLM model was developed by:	(D) None of these
(A) Hicks	(B) Keynes
(C) Friedman	(D) None of these

46. The perfectly elastic segment of the LM curve is:

(A) Keynesian range (B) Classical range

47. Which policy is effective in the Classical range?

(A) Monetary policy (B) Fiscal policy

48. Which policy is effective in the Keynesian range?

(A) Monetary policy (B) Fiscal policy

49. Which policy is effective in the intermediate range?

(A) Monetary policy	(B) Fiscal policy
(C) Both policies 50. IS-LM model was developed by:	(D) None of these
(A) Keynes	(B) Walras
(C) J.R.Hicks	(D) Don-Patinkin

51. Frictional unemployment exists:

(A) When there is a decrease in real GDP

(B) Because it takes time to find a job when one is first entering the labour force

(D) When an individual retires

52. The natural rate of unemployment equals the sum of those who are:

(A) Frictionally and structurally unemployed

(B) Frictionally and cyclically unemployed (C) Structurally and cyclically unemployed

(D) Frictionally structurally and cyclically unemployed

53. The marginal productivity of labour is:

(A) The incremental output due to an increase in capital, ceteris paribus (B) The incremental output due to an increase in labour, ceteris paribus.

(C) The incremental output due to a change in technology, ceteris paribus (D) The incremental output due to a change in technology and a change in the amount of capital.

54. The marginal productivity of labour:

(A) Increases when the price of the good sold increases, ceteris paribus

(B) Decreases when there is an adverse supply shock, ceteris paribus

(D) Decreases when there is an increase in the quantity of capital, ceteris paribus

55. When saving is greater than investment in a two-sector model,

(A) Output should increase (b) Output should decrease

56. When output exceeds spending:

(A) There is unsold output, and level of output will fall

(B) There is unsold output, and level of output will rise

(D) There is no unsold output since the level of spending will rise

57. When investment is negatively related to the rate of interest, equilibrium output in the goods market:

(A) Is unrelated to the rate of interest

(B) Is inversely related to the rate of interest

(D) Falls as the rate of interest decreases

58. Simultaneous equilibrium in the money (LM) and goods (IS) market exists:

(A) At an unlimited number of output levels and rates of interest

(B) At only one output level and rate of interest

(D) At only one output level and an unlimited number of rates of interest

59. In which of the following situations will an increase in the money supply have no effect upon output?

(A) LM is steeply sloped and IS is steeply sloped

(B) LM is vertical and IS is steeply sloped (C) LM is steeply sloped and IS is vertical

(D) LM is relatively flat as is IS

60. Crowding out occurs when:

(A) A decrease in the money supply raises the rate of interest which crowds out interest – sensitive private sector spending

(B) An increase in taxes for the private sector reduces private sector disposable income and spending

(C) A reduction in income taxes results in a higher interest rate, which crowds out interest–sensitive private sector spending

(D) A reduction in government spending induces less consumption spending

61. Policy Neutrality is the main proposition of:

(A) Supply Side Economics. (B) Keynesian Economics

62. Who invented the General Equilibrium analysis?

(A) L. Walras. (B) W. Leontief (C) J.M.Keynes. (D) None of these.

63. Employment equilibrium in the Classical theory is achieved through:

(A) Wage-Price flexibility.	(B) Changes in aggregate demand
(C) Changes in aggregate supply 64. Market does not clear is a proposition of:	(D) None of these.
(A) Neoclassical theory.	(B) Keynesian Economics
(C) Monetarism	(D) Rational expectations

65. The interest rate paid on bonds is known as:

(A) Call rate (B) Coupon rate

66. The monetary policy is completely ineffective when the LM curve is:

(A) Vertical . (B) Horizontal.

67. Monetarism is associated with:
(A) Keynesian school	(B) Chicago school
(C) Cambridge school.	(D) Neo-Classical school.

68. Changes in the subjective or objective factors

(A) Never affect consumption function

(B) Always cause downward shift in consumption function

(D) They cause upward or downward shifts in consumption function

69. Saving is a function of
(A) Export	(B) Import
(C) Investment	(D) Income

70. Entrepreneurs will have no tendency to expand or contract output and employment when

(A) AD>AS (B) AD

71. The slope of the consumption function is called

(A) MPC (B) MPS

72. The concept of effective demand is associated with the name of

(A) Marshall (B) Keynes

73. In a closed economy, the value of multiplier , when MPC is 0.90

(A) 25 (B) 90

74. Income is a ------- variable
(A) Flow	(B) Discontinuous
(C) Stock	(D) None of the above

75. Ratio of consumption expenditure to any particular level of income

(A) MPS (B) APS

76. Psychological law of consumption states that the value of MPC is lies between zero and

(A) 1 (B) 2

77. Net investment is also known as

(A) Depreciation (B) Induced investment

78. In the saving function S = -a + (1-b)Y, the term ‘b’ denotes

(A) Saving (B) MPC

79. Who propounded Psychological law of consumption

(A) Adam Smith	(B) Ricardo
(C) Keynes 80. When MPS = 0.2, MPC will be	(D) Pigou
(A) 0.8	(B) 0.2
(C) 1.2	(D) 20

81. In the linear consumption function C = a + bY, coefficient ‘a’ denotes

(A) MPC (B) APC

82. According to Keynes, rising aggregate income is always associated with

(A) Higher saving rate (B) Higher import

83. When MPC = 0.5, the value of multiplier is

(A) 5 (B) 0.5

84. Who postulated the law Supply creates its own demand

(A) Keynes (B) J B say

85. Autonomous investment is

A. Income inelastic

B. Instable

C. Interest elastic

D. Income elastic

86. MEC for a capital good was found out to be 10% and the market rate of interest is 9%, then the investment is

(A) Not profitable

(B) Profitable

(D) Cannot say

87. In the Keynesian two sector economy, AD>AS, then

(A) S=I

(B) B. S>I

C. S

D. S=0

88. Value of MPC is

(A) >1

(B) <1 o:p="">

(D) 0≤ MPC ≥1

89. Schedule that expresses relationship between rate of interest and corresponding amount

of investment

(A) MEI

(B) MEC

(D) Aggregate Demand

90. Net investment is

(A) Value of gross minus subsidies

(B) Investment after providing for depreciation

(D) None of the above

91. MEC is directly related to A. Prospective yield

B. Supply price

C. Rate of interest

D. All of the above

92. According to Keynes the most important determinant of consumption

(A) Rate of interest

(B) Saving

D. Investment

93. In the Keynesian two sector economy, AD

(A) S=I

(B) S>I

C. S

D. S=0

94. In the equation C = 60 + 0.6 Y, MPC is

(A) 60

(B) 0.6

(D) 1

95. Keynes assumed the presence of --------- economy for the fundamental law of consumption

(A) Capitalistic

(B) Socialistic

(D) None of the above

96. According to Keynes the most important determinant of investment

(A) MEC

(B) Effective demand

(D) Rate of interest

97. When disposable income rises from Rs 500 to Rs 600 and consumption expenditure

changes from Rs 470 to Rs 560, MPC will be equal to

(A) 900

(B) 100

(D) 1

98. In a two sector economy, aggregate demand is equal to

(A) C+I

(B) C+S

(D) All of the above

99. In Keynesian terminology, investment means:

(A) Financial investment

(B) Real investment

(D) None of the above

100. Rate of change in savings to change in income:

(A) APS

(B) APC

(D) MPC

101. Keynesian economics is also known as:

(A) Supply side economics

(B) Monetary economics

(D) Depression economics

102. Which of the following can cause shifts in consumption function:

(A) Psychological attitude

(B) Social practices

(D) Changes in price level

103. APC is determined by the following equation:

(A) C/Y

(B) S/Y

104. In the Keynesian two sector model, when AD = AS, then:

(A) S

(B) S>I

C. S=I

D. I=0

105. Which of the following is not correct:

(A) MPC declines as income increases

(B) MPC is positive but less than one

(D) All the above

106. According to Keynes, saving is:

(A) Private virtue but not social virtue

(B) Private and social virtue

(D) Is either social virtue or private virtue

107. MEC is inversely related to:

(A) Prospective yield

(B) Supply price

(D) Rate of interest

108. Keynes considered subjective and objective factors:

(A) Important determinants of consumption

(B) Unimportant determinants of consumption

(D) Determinants of business’s willingness to pay

109. The sum of marginal propensity to consume plus marginal propensity to save must equal to:

(A) 0

(B) 1

C. 100

D. 1000

110. Keynesian economics is:

(A) Macro

(B) Micro

(D) None

111. The MEC increases when:

(A) Capital stock increases

(B) Capital stock decreases

(D) None of the above

112. Which of the following is correct?

(A) 1+MPS = MPC

(B) 1- MPC = MPS

(D) MPC+ MPS<1 o:p="">

113. Starting point of Keynesian economics is:

(A) Effective demand

(B) Individual demand

(D) Market demand

114. Keynesian three sector model consist of:

(A) Business sector, service sector, external sector

(B) Households, business, government

(D) Government sector, private sector, open sector

115. A substantial increase in the rate of interest can cause:

(A) Increase in savings

(B) Reduce propensity to consume

(D) None of the above

116. Functional relationship between saving and disposable income is:

(A) Saving function

(B) Income function

(D) Investment function

117. As the value of MPC increases, the value of multiplier:

(A) Decreases

(B) Increases

(D) Cannot say

118. Who among the following pioneered the first real estimate of national income?

(A) Adam Smith

(B) David Ricardo

(D) None of the above

119. Who argued that national income is simply equal to “net product of agriculture”?

a. Mercantilists

b.Physiocrats

C. Classical Economists

D. Neo Classical Economists

120. Who argued that “Everything that is produced in the course of a year, every service rendered, every fresh utility brought about is a part of the national wealth.”?

(A) JS Mill

(B) Stanley Jevons

(D) Robert Malthus

121. Who made the first major attempt to estimate national income in a somewhat comprehensive manner?

(A) Robert Fisher

(B) John Maynard Keynes

(D) Arthur Pigou

122. Consumption of capital good in the process of production is called as

(A) Capital Consumption

(B) Depreciation

(D) None of the above

123. Which one of the following is roughly equal to national income?

(A) GDP B. NNP

C. GNP

D. SDP

124. Which one of the following includes ‘income of residents’?

(A) GDP

(B) NNP

(D) None of the above

125. Remittances made by NRIs to India in the context of national income accounting is called as

(A) Remittance Income

(B) NRI Income

(D) All of the above

126. Who first introduced the concept of circular flow of income?

(A) William Petty

(B) Adam Smith

(D) Fancois Quesnay

127. Which one in the following is a stock variable?

(A) Income

(B) Investment

(D) Fiscal Deficit

128. Which one in the following is a flow variable?

(A) Debt

(B) Wealth

(D) GDP

129. Why do not the sale or purchase of used goods are not included in the GDP?

(A) Used goods have only limited life

(B) Used goods are not fresh production

(D) All the above

130. Inventories are unsold goods produced by a firm, then why do they are included in GDP?

(A) Inventories represent value

(B) Inventories add to the stock of the firm

(D) All the above

131. The value of ‘intermediate goods’ are excluded from GDP calculation because:

(A) It will increase the GDP unduly

(B) It results in multiple counting of same value

(D) All the above

132. Value added at each stage of production means:

(A) Value of output minus value of input

(B) Total value added by that stage

(D) All of the above

133. Imputed value of good is added to the GDP because:

(A) They indeed represent value

(B) There is no market price for that

(D) None of the above

134. GDP Deflator is also called as:

(A) Implicit Cost Deflator

(B) GDP at Factor Cost

(D) Implicit Price Deflator

135. Personal Income includes:

(A) Dividend distributed

(B) Social insurance contributions

(D) None of the above

136. Disposable Income does not include:

(A) Excise duty paid

(B) Income tax

(D) None of the above

137. Investment is reckoned by which method for computing GDP:

(A) Income Method

(B) Product method

C. Expenditure Method

D. Value added Method

138. Adam Smith, the father of modern economic theory, defined economics as a subject, which is mainly concerned with the study of nature and causes of generation of ______

(A) Wealth

(B) Welfare

D. Scarcity

139. _________ introduced the concept of welfare in the study of economics:

(A) Fischer

(B) Alfred Marshall

(D) Adam Smith

140. Who defined economics as: a science which studies human behavior as a relationship between ends and scarce means which have alternative uses:

(A) J B Say

(B) Alfred Marshall

(D) Robbins

141. “Economics is both a science and an art”.

(A) True B. False C. None

142. The problem of scarcity and choice making can be depicted using the tool of ___ curve.

(A) Demand B. Isoquant

C. Indifference D. Production possibility

143. Macroeconomics is primarily concerned with aggregates. Which of the following is not a macroeconomic aggregate?

(A) Decision making by a household

(B) The unemployment rate, and inflation levels

(D) The supply of money

144. Scientific attempts to describe economic relationships are :

(A) Factual and can never be wrong

(B) Accurate ways to predict political viewpoints

(D) Directed at the fairness of social programs

145. The ________ method consists in deriving conclusions from general truths, takes few general principles and applies them draw conclusions.

(A) Inductive

(B) Deductive

(D) Scientific

146. ________is a term referring to an intellectual controversy over epistemology, research methodology between Carl Menger, and Gustav von Schmoller.

(A) Methodenstreit

(B) Laissez-faire

(D) Quid Proquo

147. Inductive method which also called empirical method was adopted by the:

(A) Marginalist school

(B) Mercantilists

(D) Historical School of Economists

148. Decisions made in households, firms, and government are the focus of:

(A) Positive economic

(B) Microeconomics

(D) Macroeconomics

149. Which of the following statements is normative?

(A) Higher oil prices will increase the inflation rate

(B) Tax rates on the working poor should be reduced

buy more of it

(D) If interest rates remain high this quarter, business investment will continue to be weak

150. Knowledge used to combine resources productively is called:

(A) Comparative advantage

(B) Capitalism

(D) Technology

151. Economic efficiency for the entire economy requires that :

(A) Potential gains to anyone necessitate losses to another

(B) All goods be produced at their lowest possible opportunity costs

(D) All of the above

152. Theories are:

(A) Much more complicated than common sense

(B) Scientific only if based on normative value judgments

(D) Developed when we collect data, try to explain how things work, and then

test for Validity

153. Division of Labour is limited by the extent of:

(A) Supply

(B) Demand

(D) Market

154. Milton Friedman restated the :

(A) Labour Theory

(B) Profit Theory

(D) Wage theory

155. If the value of a variable varies as a consequence of the variation in the value of some other variable, it is called:

(A) Exogenous variable

(B) Endogenours v ariable

(D) Flow

156. Saving is a function of:

(A) Export

(B) Investment

(D) Income

157. In the classical theory the equlity between saving and investment is brought about by:

(A) Income

(B) Rate Interest

(D) None of these

158. Economic Laws are:

(A) Statement of tendencies

(B) Exact and predictable

(D) None

159. Which of the following concepts are most closely associated with J.M. Keynes?

(A) Control of the money supply

(B) Marginal utility theory

(D) Marginal efficiency of capital

160. Which of the following is an example of economic overhead?

(A) Schools

(B) Roads and Railwlays

(D) Hospitals

161. Three methods of computing the national income are:

(A) Savings, investment and income methods

(B) Outlay, depreciation and production methods,

(D) Revenue, consumption and production methods

162. The difference between GNP at Factor Cost and NNP at Factor Cost is:

(A) Imports

(B) Depreciation

(D) Net income from abroad

163. An equilibrium which holds a particular position over-time is:

(A) General Equilibrium

(B) Unstable equilibrium

(D) Partial equilibrium

164. National income is a:

(A) Cross section analysis

(B) Flow concept

C. Stock concept

D. None

165. The services of a house wife are:

(A) Not part of Production

(B) A part of production

C. A part of consumption

D. Not a part of consumption

166. Inflation cannot be caused by:

(A) Cost push factor

(B) Excessive money supply

(D) Demand pull factors

167. By representing amounts of proceeds by all entrepreneurs along the Y axis and volumes of employment along the X-axis, we can draw--------curves.

(A) Employment

(B) Consumption and Savings

(D) Aggregate supply and demand

168. “Effective demand is different from aggregate demand”. This statement is:

(A) True

(B) False

C. Baseless

D. None of these

169. If MPC = 4/5, then value of the multiplier is:

(A) 20 B. 5

C. 0.80 D. 1.25

170. In the Cambridge equation of M =KPR, the value of “K” is:

(A) “V” in the Fisher’s Equation B. 1/V

C. M/V D. None of these

171. Who had a different macro theory than the rest?

(A) Adam Smith B. David Ricardo

C. Malthus D. J.B.Say

172. ”Mr. Keynes and the Classics” is the title of the famous paper by :

(A) Hansen B. Hicks

C. Harrod D. Haberler

173. Which of the following is not a flow variable:

(A) Income B. Wealth

C. Saving D. Investment

174. The quantity theory of money is primarily a theory of demand for money is stated by:

(A) Marshall B. Fisher

C. Keynes D. Friedman

175. When MPC is 0.5, the value of multiplier is:

(A) 5 B. 0.5

C. 2 D. 4

176. In Classical theory, the equality between saving and investment is brought about by:

(A) Income B. Rate of interest

C. Consumption D. Multiplier.

177. Which one of the following is not correct:

(A) MPC declines as income increases

(B) MPC is positive but less than one

(D) MPS declines as income increases

178. Marginal propensity to consume means:

(A) Inclination to conspicuous consumption

(B) Low income group spending more

(D) The rate of extra income that will be spent on consumption

179. Human capital formation refers to:

(A) The process of increasing the number of people

(B) The process of physical growth of capital

(C) The process of increasing knowledge, skills and capacities of all people D. The process of providing more facilities to the people

180. According to Keynesian analysis, consumption is a function of:

(A) Permanent income

(B) Current income

D. Previous income.

181. If in an economy, out of every additional Rs.100 of national income, Rs.20 is taxed, Rs.20 is saved, and Rs.10 is spent on imports, then the value of multiplier is:

(A) 2 B. 2.5 C. 3.3 D. 5

182. Which of the following equation is wrong?

(A) National Income = Effective demand

(B) National Income = GNP

(D) National Income = C + S

183. The essential condition to act as money is:

(A) It is homogeneous

(B) It is legal tender

C. It is backed by gold

D. It is generally acceptable

184. Which of the following is not a component of Income method to GNP?

(A) Wages and salaries B. Interest

C. Depreciation D. Net foreign investment

185. The marginal propensity to save is defined as:

(A) 1-∆C/∆Y B. S/Y C. Y/S D. Y/∆S

186. -------------is associated with the theory of multiplier:

(A) Adam Smith B. Malthus

C. Malthus D. Keynes

187. The MPC has a value:

(A) Greater than one but less than two

(B) Less than one but greater than zero

(D) None of these

188. Which of the following is not a stock variable:

(A) Vapital B. Wealth

C. Money supply D. Saving

189. An official reduction in the value of home currency in terms of foreign currency is known as:

(A) Revaluation B. Devaluation

C. Depreciation D. Appreciation

190. The value of investment multiplier depends on:

(A) APC B. APS

C. MPC D. MPS

191. Wage cut as a solution of unemployment in classical theory is suggested by:

(A) J.B. Say B. A.C. Pigou

C. Keynes D. Marshall

192. The word macro was first used in Economics by:

(A) Keynes B. Ragner Frisch

C. J.R. Hicks D. J.B. Say

193. Personal Disposable income is:

(A) Always equal to personal income

(B) Always more than personal income

(D) Equal to personal income minus indirect taxes

194. When the method of Statics is called upon to study a changing process, it is referred to as the method of:

(A) Statics B. Dynamics

C. Comparative statics D. None of these

195. In Classical theory of employment, there is the possibility of:

(A) No unemployment

(B) Voluntary unemployment

C. Disguised unemployment

D. Involuntary unemployment

196. Leakages are the factors which:

(A) Keep the power of multiplier stable

(B) Increase the power of multiplier

(D) Reduce the power multiplier to zero.

197. The phenomenon of increase in money wages that leads to increases in unemployment is shown by:

A. Speculative demand curve	B. Phillip’s curve
C. Aggregate supply	D. Income consumption curve

198. Which of the following is Keynesian saving function?

A. S = f(i)	B. S = f(P)
C. S = f (Y) 199. Usually an IS curve is a -------line.	D. S = f (W)
A. Vertical	B. Downward Slopping
C. Horizontal	D. Upward slopping

200. When consumption and income are equal, saving is ------------

A. Negative	B. Positive
C. Zero 201. When of the following is correct: A. 1/MPS = value of the multiplier B. 1/MPS = Accelerator co-efficient	D. Increasing
C. 1/MPS = MEC D. None of these 202. “Treatise on money’ is a book written by:
A. Pigou	B. Marshall
C. Robertson	D. Keynes

203. Value of money:

A. Is inversely related to the price level

B. Is directly related to the price level

C. Is independent of the price level

D. None of these

204. The major primary function of money in modern Economics is to serve as:

A. A store of value

B. A medium of exchange

C. A transfer of value

D. A standard for deferred payments

205. 1- C/Y is defined as:

A. Average propensity to consume

B. Marginal propensity co consume

C. Average propensity to save

D. Marginal propensity to save

206. The “General Theory” of Keynes was published in the year:

A. 1936 B. 1776

C. 1930 D. 1911

207. Say’s Law of market says:

A. Demand creates supply

B. Supply creates demand

C. Income generates demand

D. Savings create demand in the market.

ANSWER KEY

Question No.	Answer Key	Question No.	Answer Key	Question No.	Answer Key	Question No.	Answer Key	Questi on No.	Answer Key
1	D	51	B	101	D	151	D	201	A
2	B	52	A	102	D	152	D	202	D
3	A	53	B	103	A	153	D	203	A
4	B	54	B	104	C	154	C	204	B
5	D	55	B	105	C	155	A	205	C
6	A	56	A	106	A	156	D	206	A
7	D	57	B	107	A	157	B	207	B
8	A	58	B	108	B	158	A
9	D	59	C	109	B	159	D
10	B	60	C	110	A	160	B
11	D	61	D	111	B	161	C
12	A	62	A	112	B	162	D
13	D	63	A	113	A	163	C
14	A	64	B	114	B	164	B
15	A	65	B	115	C	165	A
16	B	66	B	116	A	166	C
17	B	67	B	117	B	167	A
18	B	68	D	118	C	168	A
19	A	69	D	119	B	169	B
20	D	70	C	120	C	170	B
21	D	71	A	121	C	171	C
22	D	72	B	122	B	172	B
23	B	73	C	123	B	173	B
24	B	74	A	124	B	174	D
25	A	75	C	125	C	175	C
26	C	76	A	126	D	176	B
27	D	77	D	127	C	177	C
28	A	78	B	128	D	178	D
29	B	79	C	129	C	179	C
30	D	80	A	130	C	180	B
31	A	81	C	131	B	181	A
32	B	82	A	132	A	182	A
33	B	83	C	133	B	183	D
34	B	84	B	134	D	184	C
35	B	85	A	135	A	185	A
36	A	86	B	136	B	186	D
37	B	87	C	137	C	187	B
38	A	88	D	138	A	188	D
39	C	89	A	139	B	189	B
40	A	90	B	140	D	190	C
41	A	91	A	141	A	191	B
42	A	92	C	142	D	192	B
43	B	93	B	143	A	193	C
44	A	94	B	144	C	194	B
45	A	95	A	145	B	195	B
46	A	96	A	146	A	196	C
47	A	97	C	147	D	197	B
48	B	98	A	148	C	198	C
49	C	99	B	149	B	199	B
50	C	100	C	150	D	200	C

SHEET 1

Q.1. Multiple choice questions

(a) Which of the following is true for a consumption line passing through the origin?

1. APC = MPC 2. APC < MPC

3. APC > MPC 4. APC = MPS

(b) Monetary policy is different from fiscal policy in

1. The type of problem associated with

2. The type of instrument used

3. The view point of the economists

4. None of the above

1. Keynes assumed a constant MPC

2. C/Y varies with increase in income in Keynes original consumption function

3. The condition that 0 < MPC < 1 holds always

4. Keynes supported Say’s law of markets

(d) According to Keynes, the basic cause of depression is

1. Too little productive capacity

2. General malfunctioning of the economy

3. Too little aggregate demand relative to productive capacity

4. Inelastic supply

(e) In India, monetary policy is implemented by the

1. Indian Congress 2. Reserve Bank of India

3. Finance Ministry 4. Planning Commission of India

(f) When a nation’s money supply persistently increases at a faster rate than the nation can increase its output of goods and services, which of the following happens

1. budget deficit increases 2. Inflation occurs

3. Real output accelerates 4. Living standards rise

(g) A higher interest rate might induce households to…..but businesses to…..

1. Save more, borrow less 2. Save less, borrow more

3. Save more, borrow more 4. Save less, borrow less

(h) Private disposable income equals

1. GNP - taxes + transfers + interest

2. NNP - taxes + transfers + interest

3. National income - taxes + transfers + interest

4. National income - taxes - transfers + interest

(i) The three approaches to measuring economic activity are the

1. cost, income and expenditure approaches

2. product, income and expenditure approaches

3. consumer, business and government approaches

4. private, public and international approaches

(j) The circular flow of goods and incomes shows the relationship between

1. Income and money 2. Wages and salaries

3. Firms and households 4. Goods and srvices

(k) A period during which aggregate output declines is

1. Expansion 2. Depression

3. Trough 4. Recession

(l) The economists who emphasized wage-flexibility as a solution for unemployment were

1. New Keynesian 2. Keynesian

3. Classical 4. Post- Keynesian

(m) J.B.Say, a French economist, is mostly known for his

1. law of demand 2. Law of returns

3. law of markets 4. Law of consumption

(n) Keynes theory seeks to replace laissez-faire by

1. Non-intervention

2. Maximum intervention by the state

3. State intervention in certain situations

4. Monetarism

(o) Macroeconomics deals with the study of

1. International trade 2. Individual trade

3. Production possibilities 4. The economy’s overall performance

(p) Macroeconomics does not study which of the following

1. Performance of the entire economy

2. Factors and forces of economic fluctuations

3. Inter-relationships between macro variables

4. Price and output determination of a commodity

(q) The circular flow of income for a two-sector model shows that saving leakages

1. Always equal investment spending

2. Sometimes equal investment spending

3. Are always less than investment spending

4. Are always greater than investment spending

(r) The first man who scientifically estimated the national income of India was

1. Jawaharlal Nehru 2. V.K.R.V.Rao

3. Manmohan Singh 4. I.K.Gujral

(s) The classical economists built their full employment models on the rational of

1. Quantity theory of goods 2. Say’s Law

3. Wicksells law 4. All of the above

(t) Absence of involuntary unemployment in an economy is called

1. Under employment 2. Full employment

3. Cyclical unemployment 4. Over full employment

KEY

a. 1	b. 2	c. 3	d. 3	e. 2	f. 2	g. 1	h. 4	i. 2	j. 3
k. 4	l. 3	m. 3	n. 3	o. 4	p. 4	q. 1	r. 2	s. 2	t. 2

SHEET 2

(a) Macroeconomic approach is

1. Partial 2. Individualistic

2. Aggregative 4. None of the above

(b) Equilibrium occurs in a two sector model when

1. Saving equals investment

2. Consumption plus investment equals the value of output

3. Planned saving equals planned investment

4. Aggregate spending equals the revenue of the business sector

1. Gross national product 2. Gross domestic product

3. Net national income 4. Net domestic product

(d) Payment by government to business enterprises without buying any goods and services is called

1. Transfer payments 2. Royalty

3. Depreciation 4. Subsidies

(e) When a nation’s money supply persistently increases at a faster rate than the nation can increase its output of goods and services, which of the following happens

1. budget deficit increases 2. Inflation occurs

3. Real output accelerates 4. Living standards rise

(f) A higher interest rate might induce households to…..but businesses to…..

1. Save more, borrow less 2. Save less, borrow more

3. Save more, borrow more 4. Save less, borrow less

(g) NNP at factor cost

1. GNP + depreciation

2. NNP at market prices + depreciation

3. NNP at market prices – Indirect taxes + subsidies

4. NNP at market prices + Indirect taxes

(h) The main postulates of the classical economics are

1. There is always full employment

2. The economy is always in the state of equilibrium

3. Money does not matter

4. All of the above

(i) The classical solution to unemployment of productive resources is

1. To increase deficit spending 2. To lower profits

3. To lower money wages 4. To lower money supply

(j) The logical starting point of Keynes theory of employment is the

1. Principle of multiplier 2. Principle of acceleration

3. Principle of economics 4.Principle of effective demand

(k) The consumption function specifies that consumption spending is

1. Positively related to the rate of interest

2. Negatively related to the rate of interest

3. Positively related to the level of disposable income

4. Negatively related to the level of disposable income

(l) The classical economists built their full employment models on the rational of

1. Quantity theory of goods 2. Say’s Law

3. Wicksells law 4. All of the above

(m) Keynesian consumption function comes under

1. Absolute income hypothesis 2. Relative income hypothesis

3. Permanent income hypothesis 4. Life cycle hypothesis

(n) The term Marginal efficiency of capital was introduced by

1. Adam Smith 2. J.M.Keynes

3. Ricardo 4. Malthus

(o) Keynes description of the whimsical investment attitudes of entrepreneurs, sometimes optimistic, sometimes pessimistic is called

1. Optimal decision making 2. Ideal solution

3. Rationality behavior 4. Animal Spirits

(p) Monetary policy is different from fiscal policy in

1. The type of problem associated with

2. The type of instrument used

3. The view point of the economists

4. None of the above

(q) “Cycles may not be twins but they are of the same family”. Who said this statement:

1. A.C.Pigou 2. J.M.Keynes

3. Adam Smith 4. Joseph kitchin

(r) Which of the following statements about economic growth is false?

1. Economic growth solves the economic problem.

2. Economic growth can be helped by having new technology.

3. Economic growth can be helped with more education.

4. Economic growth can be helped by using tidal power.

(s)What do you mean by Gross National Product?

a) The total value of goods and services produced in the country
b) The total value of all transactions in the country
c) Depreciation in the total value of goods and services produced in the country
d) The total value of goods and services produced in the country and net factor income from abroad

(t) What do you mean by the supply of goods?

a) Stock available for sale
b) Total stock in the warehouse
c) The actual production of the good
d) Quantity of the good offered for sale at a particular price per unit of time

(u) An example of a transfer payment is

1. Profit 2. Rent

3. Wages 4. Unemployment benefits

(v) If your grandparents buy a newly built retirement home, this transaction would effect

1. Investment 2. Net Exports

3. Consumption 4. Government purchases

(w) Whose opinions have revolutionised the scope of macro economics ?
1. Adam Smith 2. J.B. Say
3. J.M. Keynes 4. All of the above

KEY

a. 2	b. 2	c. 1	d. 4	e. 2	f. 1	g. 3	h. 4	i. 3
j. 4	k. 3	l. 2	m. 1	n. 2	o. 4	p. 2	q. 1	r. 1
s. 4	t. 4	u. 4	v. 1	w. 3

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