MACRO ECONOMICS MCQs
1. 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✔
2. Which of the following is not an assumption of classical theory?
(A) Price flexibility
(B) Unemployment✔
(C) Say’s law
(D) Neutrality of money
3. In classical theory the equality between saving and investment is brought about by:
(A) Rate of interest✔
(B) Income
(C) Consumption
(D) Multiplier
4. The normal condition of a capitalist economy in classical theory is:
(A) Underemployment
(B) Full employment✔
(C) General unemployment
(D) Frictional unemployment
5. Equation of exchange is associated with:
(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
(C) Real theory of interest
(D) None of these
7. In classical theory the level of employment is a function of:
(A) Price level
(B) Money wage rate
(C) Quantity of money
(D) Real 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
(C) M and P
(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
(C) Price rigidity
(D) Wage Flexibility✔
10. Fisher’s Equation of quantity theory states that :
(A) P varies directly with income
(B) P varies directly with M✔
(C) P and M are constants
(D) None of the above
11. The classical economists believed that the demand for labour is a function of:
(A) Total money wages
(B) Money wage rate
(C) Total real wages
(D) Real wage rate✔
12. In classical theory of employment, there is the possibility of:
(A) Voluntary unemployment✔
(B) No unemployment
(C) Involuntary unemployment
(D) Disguised 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
(C) No time element
(D) None of the above
16. In the Cambridge equation of M = kPR, the value of k is:
(A) M/V
(B) 1/V✔
(C) V in Fisher’s equation
(D) None of these
17. As a result of an increase in capital, ceteris paribus, ------ the marginal productivity of labour:
(A) Remains constant
(B) Increase✔
(C) decreases
(D) none of these
18. In the classical theory, one of the following is an important assumption:
(A) Wages and prices are inflexible
(B) There is full employment✔
(C) Agents are price setters
(D) Adjustment is through quantity.
19. In the Fisher’s extended equation of exchange MI VI represents:
(A) Credit money✔
(B) Primary money
C) Both primary and credit money
(D) General price level
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
(C) Full employment
(D) P is considered as an active factor✔
21. The cash balance equation M = KPO was given by:
(A) Keynes
(B) Pigou
(C) Robertson
(D) Marshall✔
22. “Supply creates its own demand “is a law of:
(A) Investment
(B) Inflation
(C) Consumption
(D) Market✔
23. In the equation MV+ MI VI = PT, ‘M ‘denotes:
(A) Velocity of money
(B) Money in circulation✔
(C) Bank deposit
(D) None of these
24.Classical demand for money, the relationship between money supply and price level is:
(A) Proportional✔
(B) Non-proportional
(C) Neither proportional nor 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
(C) Decreasing function of level of income
(D) None of these
26. The Cambridge version of the quantity theory of money was developed by:
(A) Fisher
(B) Alfred Marshall
(C) Pigou
(D) Keynes✔
27. In classical system which of the following keeps the economy at full employment:
(A) Level of saving
(B) Increase in money supply
(C) Adjustment in investment
(D) Adjustment in money wages✔
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✔
(C) Level of employment
(D) None of the above
30. In classical theory which of the following is found in the economy:
(A) Unemployment
(B) Involuntary unemployment
(C) Less than full employment
(D) Full employment✔
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✔
(C) MV = PT
(D) MV = MI VI
33. The quantity theory of money was restated by:
(A) Alfred Marshall
(B) Milton Friedman✔
(C) Irving Fisher
(D) J.M. .Keynes
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✔
(C) Law of demand
(D) Law of macro economics
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
(D) Supply side economics
36. Classicals treated money as a:
(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✔
(C) No shift
(D) None
38. An Economic model is a statement of relationship among economic ------
(A) Variables ✔
(B) Phenomena
(C) Development
(D) None of these
39. LM curve shows the equilibrium condition in ---------- market
(A) Goods market
(B) Product market
(C) Money market✔
(D) None of these
40. Supply creates its own demand is the Basis of:
(A) Classical economics ✔
(B) Keynesian economics
(C) Monetarism
(D) None of these
41. The simplest ISLM model consists of:
(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
(C) Demand
(D) Supply curve
43. The IS curve has a ------slope
(A) Positive
(B) Negative✔
(C) Zero
(D) None of these
44. The LM curve has a ----- slope
(A) Positive✔
(B) Negative
(C) Zero
(D) None of these
45. ISLM model was developed by:
(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
(C) Intermediate range
(D) None of these
47. Which policy is effective in the Classical range?
(A) Monetary policy✔
(B) Fiscal policy
(C) Incomes policy
(D) None of these
48. Which policy is effective in the Keynesian range?
(A) Monetary policy
(B) Fiscal policy✔
(C) Incomes policy
(D) None of these
49. Which policy is effective in the intermediate range?
(A) Monetary policy
(B) Fiscal policy
(C) Both policies✔
(D) None of these
50. IS-LM model was developed by:
(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✔
(C) As a result of technological change
(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✔
(C) Increase when more workers are hired, 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 increas
(b) Output should decrease✔
C) Output should not change
(d) None of these
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
(C) There is unsold output, and level of spending 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✔
(C) Is positively 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✔
(C) At an unlimited number of output levels and only one 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
(C) Monetarism
(D) Rational expectations hypothesis✔
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
(D) None of these.
64. Market does not clear is a proposition of:
(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✔
(C) Repo rate
(D) Bank rate
66. The monetary policy is completely ineffective when the LM curve is:
(A) Vertical .
(B) Horizontal.✔
(C) Upward sloping
(D) Downward sloping
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
(C) Always cause upward 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<AS
(C) AD=AS✔
D) None of the above
71. The slope of the consumption function is called
(A) MPC✔
(B) MPS
(C) APC
(D) APS
72. The concept of effective demand is associated with the name of
(A) Marshall
(B) Keynes✔
(C) Krugman
(D) Say
73. In a closed economy, the value of multiplier , when MPC is 0.90
(A) 25
(B) 90
(C) 10✔
(D) 9
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
(C) APC✔
(D) MPC
76. Psychological law of consumption states that the value of MPC is lies between zero and
(A) 1 ✔
(B) 2
(C) 3
(D) 4
77. Net investment is also known as
(A) Depreciation
(B) Induced investment
(C) Autonomous investment
(D) Capital formation✔
78. In the saving function S = -a + (1-b)Y, the term ‘b’ denotes
(A) Saving
(B) MPC✔
(C) MPS
(D) APS
79. Who propounded Psychological law of consumption
(A) Adam Smith
(B) Ricardo
(C) Keynes ✔
(D) Pigou
80. When MPS = 0.2, MPC will be
(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
(C) Autonomous consumption✔
(D) Induced consumption
82. According to Keynes, rising aggregate income is always associated with
(A) Higher saving rate ✔
(B) Higher import
(C) Lower export
(D) Low production
83. When MPC = 0.5, the value of multiplier is
(A) 5
(B) 0.5
(C) 2 ✔
(D) 4
84. Who postulated the law Supply creates its own demand
(A) Keynes
(B) J B say✔
(C) Marshall
(D) Pigou
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✔
C. Breakeven
D. Cannot say
87. In the Keynesian two sector economy, AD>AS, then
A. S=I
B. S>I
C. S<I✔
D. S=0
88. Value of MPC is
A. >1
B. <1
C. 0
D. 0≤ MPC ≥1✔
89. Schedule that expresses relationship between rate of interest and corresponding amount
of investment
A. MEI✔
B. MEC
C. Effective Demand
D. Aggregate Demand
90. Net investment is
A. Value of gross minus subsidies
B. Investment after providing for depreciation✔
C. Value of gross output before providing for subsidies
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
C. Income✔
D. Investment
93. In the Keynesian two sector economy, AD<AS, then
A. S=I
B. S>I✔
C. S<I
D. S=0
94. In the equation C = 60 + 0.6 Y, MPC is
A. 60
B. 0.6✔
C. 0
D. 1
95. Keynes assumed the presence of --------- economy for the fundamental law of
consumption
A. Capitalistic✔
B. Socialistic
C. Planned
D. None of the above
96. According to Keynes the most important determinant of investment
A. MEC✔
B. Effective demand
C. Aggregate 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
C. 0.9✔
D. 1
98. In a two sector economy, aggregate demand is equal to
A. C+I✔
B. C+S
C. S+I
D. All of the above
99. In Keynesian terminology, investment means:
A. Financial investment
B. Real investment✔
C. Induced investment
D. None of the above
100. Rate of change in savings to change in income:
A. APS
B. APC
C. MPS✔
D. MPC
(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✔
2. Which of the following is not an assumption of classical theory?
(A) Price flexibility
(B) Unemployment✔
(C) Say’s law
(D) Neutrality of money
3. In classical theory the equality between saving and investment is brought about by:
(A) Rate of interest✔
(B) Income
(C) Consumption
(D) Multiplier
4. The normal condition of a capitalist economy in classical theory is:
(A) Underemployment
(B) Full employment✔
(C) General unemployment
(D) Frictional unemployment
5. Equation of exchange is associated with:
(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
(C) Real theory of interest
(D) None of these
7. In classical theory the level of employment is a function of:
(A) Price level
(B) Money wage rate
(C) Quantity of money
(D) Real 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
(C) M and P
(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
(C) Price rigidity
(D) Wage Flexibility✔
10. Fisher’s Equation of quantity theory states that :
(A) P varies directly with income
(B) P varies directly with M✔
(C) P and M are constants
(D) None of the above
11. The classical economists believed that the demand for labour is a function of:
(A) Total money wages
(B) Money wage rate
(C) Total real wages
(D) Real wage rate✔
12. In classical theory of employment, there is the possibility of:
(A) Voluntary unemployment✔
(B) No unemployment
(C) Involuntary unemployment
(D) Disguised 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
(C) No time element
(D) None of the above
16. In the Cambridge equation of M = kPR, the value of k is:
(A) M/V
(B) 1/V✔
(C) V in Fisher’s equation
(D) None of these
17. As a result of an increase in capital, ceteris paribus, ------ the marginal productivity of labour:
(A) Remains constant
(B) Increase✔
(C) decreases
(D) none of these
18. In the classical theory, one of the following is an important assumption:
(A) Wages and prices are inflexible
(B) There is full employment✔
(C) Agents are price setters
(D) Adjustment is through quantity.
19. In the Fisher’s extended equation of exchange MI VI represents:
(A) Credit money✔
(B) Primary money
C) Both primary and credit money
(D) General price level
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
(C) Full employment
(D) P is considered as an active factor✔
21. The cash balance equation M = KPO was given by:
(A) Keynes
(B) Pigou
(C) Robertson
(D) Marshall✔
22. “Supply creates its own demand “is a law of:
(A) Investment
(B) Inflation
(C) Consumption
(D) Market✔
23. In the equation MV+ MI VI = PT, ‘M ‘denotes:
(A) Velocity of money
(B) Money in circulation✔
(C) Bank deposit
(D) None of these
24.Classical demand for money, the relationship between money supply and price level is:
(A) Proportional✔
(B) Non-proportional
(C) Neither proportional nor 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
(C) Decreasing function of level of income
(D) None of these
26. The Cambridge version of the quantity theory of money was developed by:
(A) Fisher
(B) Alfred Marshall
(C) Pigou
(D) Keynes✔
27. In classical system which of the following keeps the economy at full employment:
(A) Level of saving
(B) Increase in money supply
(C) Adjustment in investment
(D) Adjustment in money wages✔
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✔
(C) Level of employment
(D) None of the above
30. In classical theory which of the following is found in the economy:
(A) Unemployment
(B) Involuntary unemployment
(C) Less than full employment
(D) Full employment✔
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✔
(C) MV = PT
(D) MV = MI VI
33. The quantity theory of money was restated by:
(A) Alfred Marshall
(B) Milton Friedman✔
(C) Irving Fisher
(D) J.M. .Keynes
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✔
(C) Law of demand
(D) Law of macro economics
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
(D) Supply side economics
36. Classicals treated money as a:
(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✔
(C) No shift
(D) None
38. An Economic model is a statement of relationship among economic ------
(A) Variables ✔
(B) Phenomena
(C) Development
(D) None of these
39. LM curve shows the equilibrium condition in ---------- market
(A) Goods market
(B) Product market
(C) Money market✔
(D) None of these
40. Supply creates its own demand is the Basis of:
(A) Classical economics ✔
(B) Keynesian economics
(C) Monetarism
(D) None of these
41. The simplest ISLM model consists of:
(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
(C) Demand
(D) Supply curve
43. The IS curve has a ------slope
(A) Positive
(B) Negative✔
(C) Zero
(D) None of these
44. The LM curve has a ----- slope
(A) Positive✔
(B) Negative
(C) Zero
(D) None of these
45. ISLM model was developed by:
(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
(C) Intermediate range
(D) None of these
47. Which policy is effective in the Classical range?
(A) Monetary policy✔
(B) Fiscal policy
(C) Incomes policy
(D) None of these
48. Which policy is effective in the Keynesian range?
(A) Monetary policy
(B) Fiscal policy✔
(C) Incomes policy
(D) None of these
49. Which policy is effective in the intermediate range?
(A) Monetary policy
(B) Fiscal policy
(C) Both policies✔
(D) None of these
50. IS-LM model was developed by:
(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✔
(C) As a result of technological change
(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✔
(C) Increase when more workers are hired, 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 increas
(b) Output should decrease✔
C) Output should not change
(d) None of these
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
(C) There is unsold output, and level of spending 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✔
(C) Is positively 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✔
(C) At an unlimited number of output levels and only one 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
(C) Monetarism
(D) Rational expectations hypothesis✔
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
(D) None of these.
64. Market does not clear is a proposition of:
(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✔
(C) Repo rate
(D) Bank rate
66. The monetary policy is completely ineffective when the LM curve is:
(A) Vertical .
(B) Horizontal.✔
(C) Upward sloping
(D) Downward sloping
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
(C) Always cause upward 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<AS
(C) AD=AS✔
D) None of the above
71. The slope of the consumption function is called
(A) MPC✔
(B) MPS
(C) APC
(D) APS
72. The concept of effective demand is associated with the name of
(A) Marshall
(B) Keynes✔
(C) Krugman
(D) Say
73. In a closed economy, the value of multiplier , when MPC is 0.90
(A) 25
(B) 90
(C) 10✔
(D) 9
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
(C) APC✔
(D) MPC
76. Psychological law of consumption states that the value of MPC is lies between zero and
(A) 1 ✔
(B) 2
(C) 3
(D) 4
77. Net investment is also known as
(A) Depreciation
(B) Induced investment
(C) Autonomous investment
(D) Capital formation✔
78. In the saving function S = -a + (1-b)Y, the term ‘b’ denotes
(A) Saving
(B) MPC✔
(C) MPS
(D) APS
79. Who propounded Psychological law of consumption
(A) Adam Smith
(B) Ricardo
(C) Keynes ✔
(D) Pigou
80. When MPS = 0.2, MPC will be
(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
(C) Autonomous consumption✔
(D) Induced consumption
82. According to Keynes, rising aggregate income is always associated with
(A) Higher saving rate ✔
(B) Higher import
(C) Lower export
(D) Low production
83. When MPC = 0.5, the value of multiplier is
(A) 5
(B) 0.5
(C) 2 ✔
(D) 4
84. Who postulated the law Supply creates its own demand
(A) Keynes
(B) J B say✔
(C) Marshall
(D) Pigou
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✔
C. Breakeven
D. Cannot say
87. In the Keynesian two sector economy, AD>AS, then
A. S=I
B. S>I
C. S<I✔
D. S=0
88. Value of MPC is
A. >1
B. <1
C. 0
D. 0≤ MPC ≥1✔
89. Schedule that expresses relationship between rate of interest and corresponding amount
of investment
A. MEI✔
B. MEC
C. Effective Demand
D. Aggregate Demand
90. Net investment is
A. Value of gross minus subsidies
B. Investment after providing for depreciation✔
C. Value of gross output before providing for subsidies
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
C. Income✔
D. Investment
93. In the Keynesian two sector economy, AD<AS, then
A. S=I
B. S>I✔
C. S<I
D. S=0
94. In the equation C = 60 + 0.6 Y, MPC is
A. 60
B. 0.6✔
C. 0
D. 1
95. Keynes assumed the presence of --------- economy for the fundamental law of
consumption
A. Capitalistic✔
B. Socialistic
C. Planned
D. None of the above
96. According to Keynes the most important determinant of investment
A. MEC✔
B. Effective demand
C. Aggregate 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
C. 0.9✔
D. 1
98. In a two sector economy, aggregate demand is equal to
A. C+I✔
B. C+S
C. S+I
D. All of the above
99. In Keynesian terminology, investment means:
A. Financial investment
B. Real investment✔
C. Induced investment
D. None of the above
100. Rate of change in savings to change in income:
A. APS
B. APC
C. MPS✔
D. MPC
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