Deck 2: Economic Models,Concepts and Theories: Part A

Question 1

The efficiency wage model is associated with

A)new keynesian economics
B)new classical economics
C)supply side economics
D)keynesian economics

Answer 1

new keynesian economics

Question 2

The insider outsider model is associated with

A)new keynesian economics
B)new classical economics
C)supply side economics
D)none of these

Answer 2

new keynesian economics

Question 3

The Menu cost model is associated with

A)new classical economics
B)new keynesian economics
C)supply side economics
D)none of these

Answer 3

new keynesian economics

Question 4

The New Classical economics was developed against the back ground of

A)1930's depression
B)1970' stagflation
C)2008 subprime crisis
D)none of these

Question 5

Reagonomics is related to

A)supply side economics'
B)new classical economics
C)new keynesian economics
D)natural unemployment hypothesis

Question 6

Ratex hypothesis is related to

A)new classical economics
B)supply side economics
C)new keynesian economics
D)none of these

Question 7

Inflation can be contained by

A)surplus budget
B)increase in taxation
C)reduction in public expenditure
D)all these three measures

Question 8

Gregory Mankiw belongs to

A)new keynesian economics
B)new classical economics
C)supply side economics
D)none of these

Question 9

According to Hawtrey, the business cycle is caused by

A)variation in the interest of banking system
B)variation in the price level of the economy
C)variation in the money supply by bank
D)all the above

Question 10

Which of the following are main postulates of Supply side Economics

A)cut in tax rate
B)increasing public expenditure
C)both a and b
D)none of these

Question 11

Which of the following economist is not related to New Classical Economics

A)artherlaffer
B)thomas surgent
C)robert lucas
D)neil walace

Question 12

According to New Classical Economist, Business cycle is due to

A)anticipated policy change
B)unanticipated policy change
C)both a and b
D)none of these

Question 13

The shape of Laffer curve is

A)inverted u shape
B)u shape
C)inverse l shape
D)none of these

Question 14

The curve which explains relationship between tax rate and tax revenue is called

A)laffer curve
B)kuznets curve
C)lorenz curve
D)none of these

Question 15

According to New classical Economics

A)anticipated policy change will not affect output
B)unanticipated policy change will affect output
C)both a and b
D)none of these

Question 16

According to New Classical Economics Philips curve is

A)always vertical
B)always horizontal
C)always downward slopping
D)downward slopping in short run and vertical in the long run

Question 17

Liquidity trap is a situation when,

A)all potential investors expect the rate of interest to rise in future
B)all potential investors expect the rate of interest to fall in future
C)natural rate of interest is above the critical rate of interest
D)demand for money for speculative purpose is interest inelastic

Question 18

The classical economists focussed on the role of money as

A)medium of exchange
B)medium of distribution
C)wealth
D)link between present and future

Question 19

According to Milton Friedman Theory of permanent component of consumption-expenditure depends on i. Transitory income alone ii. Transitory and permanent income iii. Permanent income alone iv. Windfall gains Codes :

A)i and ii are correct
B)i and iii are correct
C)ii and iv are correct
D)only iii is correct

Question 20

The classical model of economic development emphasises

A)laissez-faire policy
B)capital accumulation
C)both (a) and (b)
D)none of these

Question 21

Assertion (A): According to Keynes, individuals hold either cash or all bonds. Reasoning (R): Because, according to him, the speculative demand for money is associated with uncertainty. Codes:

A)both (a) and (r) are correct and (r) is the correct explanation of (a).
B)both (a) and (r) are correct, but (r) is not the correct explanation of (a).
C)(a) is correct, but (r) is incorrect.
D)both (a) and (r) are incorrect.

Question 22

Speculative demand for money is zero when market rate of interest is

A)more than the 'critical rate'.
B)more than the market rate of interest but less than the critical rate (i.e. capital gains occur).
C)less than the market rate of interest.
D)lowest (i.e. in liquidity trap).

Question 23

Assertion (A) : There exits inverse relationship between interest rates and bond prices. Reason (R) : A bond price represents the present discounted value of the payments agreed upon at the time when the bond was issued. Codes :

A)both (a) and (r) are correct, and (r) is the correct explanation of (a).
B)(a) is correct, but (r) is not the correct explanation of (a).
C)(a) is correct, but (r) is incorrect.
D)(a) is incorrect, but (r) is correct.

Question 24

According to Says law of market what is the main cause of overproduction?

A)unemployment
B)fall in demand
C)rise in price
D)fall in wage rate

Question 25

In Classical system how to correct an overproduction or glut in the market?

A)by increasing price o f input
B)by wage cut policy
C)by price cut policy
D)by decreasing production