Deck 6: Macroeconomic Concepts and Theories

Question 1

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

Answer 1

An outward shift of aggregate demand and demand-pull inflation

Question 2

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

Answer 2

Real wages are back at long-run equilibrium level

Question 3

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.

Answer 3

If money supply increases and production falls.

Question 4

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 5

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 6

Which groups are not protected from inflation?

A)Industrial worker
B)Agricultural farmers
C)Government pensioners
D)Saving bank account holders

Question 7

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

Question 8

What is Cost-Push inflation?

A)Increasing money supply
B)Increasing indirect tax
C)Population increase
D)expenditure increase unnecessarily.

Question 9

Inflation is the state in which ..............................

A)The value of money decreases
B)The value of money increases
C)The value of the money increases first and then decreases
D)The value of money decreases first and increases later

Question 10

Which of the following class will not be negatively affected by the higher inflation?

A)The consumer class
B)The debtor class
C)Pensioner class
D)Business class

Question 11

Which of the following is an effect of inflation?

A)Erosion in purchasing power
B)Affects relative price of goods
C)Increase in inequalities of income
D)All the above

Question 12

Excess demand for money, according to Say's law in the Economy:

A)Is greater
B)Is very less
C)Is equal to zero
D)There is no relationship between excess demand for money and Say's Law

Question 13

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

A)Price flexibility
B)Unemployment
C)Say's law
D)Neutrality of money

Question 14

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

A)Rate of interest
B)Income
C)Consumption
D)Multiplier

Question 15

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

A)Underemployment
B)Full employment
C)General unemployment
D)Frictional unemployment

Question 16

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

A)Voluntary unemployment
B)No unemployment
C)Involuntary unemployment
D)Disguised unemployment

Question 17

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

A)Investment
B)Inflation
C)Consumption
D)Market

Question 18

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

Question 19

Supply creates its own demand is the Basis of:

A)Classical economics
B)Keynesian economics
C)Monetarism
D)None of these

Question 20

Which policy is effective in the Keynesian range?

A)Monetary policy
B)Fiscal policy
C)Incomes policy
D)None of these

Question 21

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 22

Saving is a function of

A)Export
B)Import
C)Investment
D)Income

Question 23

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 24

The concept of effective demand is associated with the name of

A)Marshall
B)Keynes
C)Krugman
D)Say