Question 1

The efficiency wage model is associated with
A)new keynesian economics
B)new classical economics
C)supply side economics
D)keynesian economics

Accepted Answer

The efficiency wage model, which suggests that higher wages can lead to increased productivity among workers, is associated with New Keynesian economics. This theory posits that paying workers more than the market-clearing wage can reduce turnover, increase morale, and improve efficiency, which are concepts embraced within New Keynesian thought.

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

Accepted Answer

The insider-outsider model is associated with New Keynesian economics. It explains labor market phenomena, including wage rigidity and unemployment, by considering the different incentives and bargaining powers of "insiders" (employed workers) and "outsiders" (unemployed individuals seeking employment).

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

Accepted Answer

The Menu cost model is associated with New Keynesian economics. It explains how small or nominal costs (like the cost of changing a menu in a restaurant) can lead to prices being sticky and not adjusting immediately to changes in supply and demand, contributing to short-term economic rigidity.

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

Accepted Answer

The New Classical economics emerged as a response to the 1970s stagflation, which was a period characterized by high inflation and stagnant economic growth, challenging the prevailing Keynesian economic theories of the time.

Question 5

Reagonomics is related to
A)supply side economics'
B)new classical economics
C)new keynesian economics
D)natural unemployment hypothesis

Accepted Answer

Reagonomics, associated with President Ronald Reagan, is primarily related to supply-side economics, which emphasizes tax cuts, deregulation, and reducing government spending to stimulate economic growth.

Question 6

Ratex hypothesis is related to
A)new classical economics
B)supply side economics
C)new keynesian economics
D)none of these

Accepted Answer

The Rational Expectations (Ratex) hypothesis is primarily associated with New Classical Economics. It posits that individuals form expectations about the future based on all available information and therefore, on average, predict future economic variables accurately.

Question 7

Inflation can be contained by
A)surplus budget
B)increase in taxation
C)reduction in public expenditure
D)all these three measures

Accepted Answer

All these measures can help contain inflation. A surplus budget implies the government is spending less than it earns, which can reduce the total money supply in the economy. Increasing taxation can decrease consumers' disposable income, leading to reduced spending. Reduction in public expenditure directly cuts down the amount of money the government is injecting into the economy, which can also help in controlling inflation.

Question 8

Gregory Mankiw belongs to
A)new keynesian economics
B)new classical economics
C)supply side economics
D)none of these

Accepted Answer

Gregory Mankiw is most closely associated with New Keynesian economics, which incorporates microeconomic foundations into Keynesian economics to address issues such as price stickiness and market failures.

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

Accepted Answer

Hawtrey believed that the business cycle is primarily caused by variations in the interest rates set by the banking system, which in turn affects the money supply and the price levels in the economy. Thus, all the given options are considered causes of the business cycle according to Hawtrey's theory.

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

Accepted Answer

Supply-side economics primarily focuses on reducing tax rates to encourage economic growth by increasing the supply of goods and services. It does not emphasize increasing public expenditure as a main postulate.

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

Accepted Answer

Arthur Laffer is primarily associated with supply-side economics, which is distinct from New Classical Economics. New Classical Economics is more focused on rational expectations and market clearing models, while supply-side economics emphasizes the role of tax rates on economic incentives. Thomas Sargent, Robert Lucas, and Neil Wallace are all economists who have contributed significantly to the development of New Classical Economics.

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

Accepted Answer

New Classical Economists argue that business cycles are primarily caused by unanticipated policy changes, as individuals and businesses can adjust to anticipated changes in advance, thus mitigating their impact on the economy.

Question 13

The shape of Laffer curve is
A)inverted u shape
B)u shape
C)inverse l shape
D)none of these

Accepted Answer

The Laffer curve is depicted as an inverted U-shape, illustrating the relationship between tax rates and the amount of tax revenue collected by governments. The curve suggests that there is an optimal tax rate that maximizes revenue without deterring economic activity.

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

Accepted Answer

The Laffer Curve illustrates the concept of taxable income elasticity—i.e., taxable income will change in response to changes in the rate of taxation. It suggests that there is an optimal tax rate that maximizes revenue without discouraging economic activity.

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

Accepted Answer

New classical economics posits that anticipated policy changes are already factored into economic agents' decisions and thus do not affect output, while unanticipated policy changes can affect output because they catch economic agents by surprise, leading to adjustments in their behavior.

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

Accepted Answer

New Classical Economics posits that the Philips curve is always vertical, indicating that there is no long-term trade-off between inflation and unemployment.

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

Accepted Answer

The answer of Liquidity trap is a situation when,
A)all potential...

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

Accepted Answer

Classical economists primarily viewed money as a medium of exchange, facilitating transactions in the economy.

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

Accepted Answer

Milton Friedman's Theory of the Consumption Function suggests that an individual's consumption at a point in time depends on their permanent income, not on their current income which may include transitory elements. Permanent income is a person's normal, average income over the long term, excluding short-term fluctuations.

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

Accepted Answer

The classical model of economic development emphasizes both laissez-faire policy, which advocates for minimal government intervention in the economy, and capital accumulation, which is considered essential for economic growth.

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

The efficiency wage model is associated with

The insider outsider model is associated with

The Menu cost model is associated with

The New Classical economics was developed against the back ground of

Reagonomics is related to

Ratex hypothesis is related to

Inflation can be contained by

Gregory Mankiw belongs to

According to Hawtrey, the business cycle is caused by

Which of the following are main postulates of Supply side Economics

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

According to New Classical Economist, Business cycle is due to

The shape of Laffer curve is

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

According to New classical Economics

According to New Classical Economics Philips curve is

Liquidity trap is a situation when,

The classical economists focussed on the role of money as

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 :

The classical model of economic development emphasises