Deck 4: Economic Concepts and Policies

Question 1

"Supply creates its own demand "is a law of:

A)investment
B)inflation
C)consumption
D)market

Answer 1

market

Question 2

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

A)level of investment
B)rate of interest
C)level of employment
D)none of the above

Answer 2

rate of interest

Question 3

Supply creates its own demand is the Basis of:

A)classical economics
B)keynesian economics
C)monetarism
D)none of these

Answer 3

classical economics

Question 4

Which policy is effective in the Keynesian range?

A)monetary policy
B)fiscal policy
C)incomes policy
D)none of these

Question 5

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
C)there is unsold output, and level of spending will rise
D)there is no unsold output since the level of spending will rise

Question 6

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

A)ad>as
B)adC)ad=as
D)none of the above

Question 7

The concept of effective demand is associated with the name of

A)marshall
B)keynes
C)krugman
D)say

Question 8

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

A)1
B)2
C)3
D)4

Question 9

Net investment is also known as

A)depreciation
B)induced investment
C)autonomous investment
D)capital formation

Question 10

In the saving function S = -a + (b)Y, the term 'b' denotes

A)saving
B)mpc
C)mps
D)aps

Question 11

Who propounded Psychological law of consumption

A)adam smith
B)ricardo
C)keynes
D)pigou

Question 12

When MPS = 0.2, MPC will be

A)0.8
B)0.2
C)1.2
D)20

Question 13

In the linear consumption function C = a + bY, coefficient 'a' denotes

A)mpc
B)apc
C)autonomous consumption
D)induced consumption

Question 14

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

A)60
B)0.6
C)0
D)1

Question 15

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

A)capitalistic
B)socialistic
C)planned
D)none of the above

Question 16

Demand-pull inflation may be caused by:

A)an increase in costs
B)a reduction in interest rates
C)a reduction in government spending
D)an outward shift in aggregate supply

Question 17

Inflation:

A)always reduces the cost of living
B)always reduces the standard of living
C)reduces the price of products
D)reduces the purchasing power of a rupee

Question 18

An increase in injections into the economy may lead to:

A)an outward shift of aggregate demand and demand-pull inflation
B)an outward shift of aggregate demand and cost-push inflation
C)an outward shift of aggregate supply and demand-pull inflation
D)an outward shift of aggregate supply and cost-push inflation

Question 19

According to the Phillips curve, unemployment will return to the natural rate when:

A)nominal wages are equal to expected wages
B)real wages are back at long-run equilibrium level
C)nominal wages are growing faster than inflation
D)inflation is higher than the growth of nominal wages

Question 20

What is the cause of inflation?

A)if money supply increases.
B)if the production rate falls.
C)if money supply increases and production falls.
D)both money supply and production decreases.

Question 21

What does the inflation imply?

A)rise in budget deficit
B)rise in prices of consumer goods.
C)rise in money supply.
D)rise in general price index.

Question 22

How the inflation can be checked temporarily?

A)increase in money supply
B)decrease in money supply
C)increase in wages
D)decrease in tax

Question 23

Which groups are not protected from inflation?

A)industrial worker
B)agricultural farmers
C)government pensioners
D)saving bank account holders

Question 24

Which of the following cannot be included among the remedies of inflation?

A)better capacity utilization
B)by making low bank rate
C)by reducing budget deficit
D)by making high bank rate