Quiznetik
Macro Economics 1 | Set 1
1. 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
Correct : D. real wage rate
2. In classical theory of employment, there isthe possibility of:
A. voluntary unemployment
B. no unemployment
C. involuntary unemployment
D. disguised unemployment
Correct : A. voluntary unemployment
3. 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
Correct : D. a.c.pigou
4. Say’s law of market says:
A. supply creates its own demand
B. demand creates supply
C. income generates demand
D. savings create demand
Correct : A. supply creates its own demand
5. The aggregate production function implied under classical theory is :
A. long run
B. short run
C. no time element
D. none of the above
Correct : A. long run
6. In the Cambridge equation of M = kPR, the value of kis:
A. m/v
B. 1/v
C. v in fisher’s equation
D. none of these
Correct : B. 1/v
7. 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
Correct : B. increase
8. In the Fisher’s extended equation of exchange MI VI represents:
A. credit money
B. primary money
C. both primary andcredit money
D. general price level
Correct : A. credit money
9. 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
Correct : D. p is considered as an active factor
10. The cash balance equation M = KPO was given by:
A. keynes
B. pigou
C. robertson
D. marshall
Correct : D. marshall
11. “Supply creates its own demand “is a law of:
A. investment
B. inflation
C. consumption
D. market
Correct : D. market
12. In the equation MV+ MI VI = PT, ‘M ‘denotes:
A. velocity of money
B. money in circulation
C. bank deposit
D. none of these
Correct : B. money in circulation
13. I 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
Correct : B. non-proportional
14. 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
Correct : A. an increasing function of rate of interest
15. The Cambridge version of the quantity theory of money was developed by:
A. fisher
B. alfred marshall
C. pigou
D. keynes
Correct : C. pigou
16. 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
Correct : D. adjustment in money wages
17. 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
Correct : A. m
18. According to classical economists, variationsin savings are due to:
A. level of investment
B. rate ofinterest
C. level of employment
D. none of the above
Correct : B. rate ofinterest
19. 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
Correct : D. full employment
20. In MV=PT, if M doubles and V and T remain constant, then P will:
A. double
B. 1/2
C. 1
D. 4
Correct : A. double
21. Pigou’s version of Cambridge equation is:
A. m = kp/y
B. p= kr/m
C. mv = pt
D. mv = mivi
Correct : B. p= kr/m
22. The quantity theory of money was restated by:
A. alfred marshall
B. milton friedman
C. irving fisher
D. j.m. .keynes
Correct : B. milton friedman
23. 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
Correct : B. say’s law of market
24. 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
Correct : B. keynesian economics
25. Classicals treated money as a:
A. medium of exchange
B. store of value
C. both
D. none
Correct : A. medium of exchange
26. When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:
A. leftward
B. rightward
C. no shift
D. none
Correct : B. rightward
27. An Economic model is a statement of relationship among economic ------
A. variables
B. phenomena
C. development
D. none of these
Correct : A. variables
28. LM curve shows the equilibrium condition in ---------- market
A. goods market
B. product market
C. money market
D. none of these
Correct : C. money market
29. Supply creates its own demand is the Basis of:
A. classical economics
B. keynesian economics
C. monetarism
D. none of these
Correct : A. classical economics
30. The simplest ISLM model consists of:
A. two markets
B. three markets
C. four markets
D. five markets
Correct : A. two markets
31. The equilibrium in the product market is represented by which curve?
A. is
B. lm
C. demand
D. supply curve
Correct : A. is
32. The IS curve has a------slope
A. positive
B. negative
C. zero
D. none of these
Correct : B. negative
33. The LM curve has a------slope
A. positive
B. negative
C. zero
D. none of these
Correct : A. positive
34. ISLM model was developed by:
A. hicks
B. keynes
C. friedman
D. none of these
Correct : A. hicks
35. The perfectly elastic segment of the LM curve is:
A. keynesian range
B. classical range
C. intermediate range
D. none of these
Correct : A. keynesian range
36. Which policy is effective in the Classical range?
A. monetary policy
B. fiscal policy
C. incomes policy
D. none of these
Correct : A. monetary policy
37. Which policy is effective in the Keynesian range?
A. monetary policy
B. fiscal policy
C. incomes policy
D. none of these
Correct : B. fiscal policy
38. Which policy is effective in the intermediate range?
A. monetary policy
B. fiscal policy
C. both policies
D. none of these
Correct : C. both policies
39. IS-LM model was developed by:
A. keynes
B. walras
C. j.r.hicks
D. don-patinkin
Correct : C. j.r.hicks
40. 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
Correct : B. because it takes time to find a job when one is first entering the labour force
41. The natural rate of unemployment equals the sum of those who are:
A. frictionally and structurally unemployed
B. frictionallyandcyclicallyunemployed
C. structurallyandcyclicallyunemployed
D. frictionally structurally and cyclically unemployed
Correct : A. frictionally and structurally unemployed
42. 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
Correct : B. the incremental output due to an increase in labour, ceteris paribus.
43. 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
Correct : B. decreases when there is an adverse supply shock, ceteris paribus
44. When saving is greater than investment in a two-sectormodel,
A. outputshould increase
B. output should decrease
C. output should not change
D. none of these
Correct : B. output should decrease
45. 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 willrise
D. there is no unsold output since the level of spending will rise
Correct : A. there is unsold output, and level of output will fall
46. 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
Correct : B. is inversely related to the rate of interest
47. 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 ofinterest
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
Correct : B. at only one output level and rate ofinterest
48. 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
Correct : C. lm is steeply sloped and is is vertical
49. Policy Neutrality is the main proposition of:
A. supply side economics.
B. keynesian economics
C. monetarism
D. rational expectations hypothesis
Correct : D. rational expectations hypothesis
50. Who invented the General Equilibrium analysis?
A. l. walras.
B. w. leontief
C. j.m.keynes.
D. none of these.
Correct : A. l. walras.
51. Employment equilibrium in the Classical theory is achievedthrough:
A. wage-price flexibility.
B. changes in aggregate demand
C. changes in aggregate supply
D. none of these.
Correct : A. wage-price flexibility.
52. Market does not clear is a proposition of:
A. neoclassical theory.
B. keynesian economics
C. monetarism
D. rational expectations
Correct : B. keynesian economics
53. The interest rate paid on bonds is known as:
A. call rate
B. coupon rate
C. repo rate
D. bank rate
Correct : B. coupon rate
54. The monetary policy is completely ineffective when the LM curve is:
A. vertical .
B. horizontal.
C. upward sloping.
D. downward sloping
Correct : B. horizontal.
55. Monetarism is associated with:
A. keynesian school
B. chicago school
C. cambridge school.
D. neo-classical school.
Correct : B. chicago school
56. 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
Correct : D. they cause upward or downward shifts in consumption function
57. Saving is a function of
A. export
B. import
C. investment
D. income
Correct : D. income
58. 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
Correct : C. ad=as
59. The slope of the consumption function is called
A. mpc
B. mps
C. apc
D. aps
Correct : A. mpc
60. The concept of effective demand is associated with the nameof
A. marshall
B. keynes
C. krugman
D. say
Correct : B. keynes
61. In a closed economy, the value of multiplier , when MPC is 0.90
A. 25
B. 90
C. 10
D. 9
Correct : C. 10
62. Income is a ------- variable
A. flow
B. discontinuous
C. stock
D. none of the above
Correct : A. flow
63. Ratio of consumption expenditure to any particular level ofincome
A. mps
B. aps
C. apc
D. mpc
Correct : C. apc
64. Psychological law of consumption states that the value of MPC is lies between zero and
A. 1
B. 2
C. 3
D. 4
Correct : A. 1
65. Net investment is also known as
A. depreciation
B. induced investment
C. autonomousinvestment
D. capital formation
Correct : D. capital formation
66. In the saving function S = -a + (1-b)Y, the term ‘b’ denotes
A. saving
B. mpc
C. mps
D. aps
Correct : B. mpc
67. Who propounded Psychological law of consumption
A. adam smith
B. ricardo
C. keynes
D. pigou
Correct : C. keynes
68. When MPS = 0.2, MPC will be
A. 0.8
B. 0.2
C. 1.2
D. 20
Correct : A. 0.8
69. In the linear consumption function C = a + bY, coefficient ‘a’ denotes
A. mpc
B. apc
C. autonomous consumption
D. induced consumption
Correct : C. autonomous consumption
70. According to Keynes, rising aggregate income is always associated with
A. higher saving rate
B. higher import
C. lower export
D. low production
Correct : A. higher saving rate
71. When MPC = 0.5, the value of multiplier is
A. 5
B. 0.5
C. 2
D. 4
Correct : C. 2
72. Who postulated the law Supply creates its own demand
A. keynes
B. j b say
C. marshall
D. pigou
Correct : B. j b say
73. Autonomousinvestment is
A. income inelastic
B. instable
C. interest elastic
D. incomeelastic
Correct : A. income inelastic
74. 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
Correct : B. profitable
75. In the Keynesian two sector economy, AD>AS, then
A. s=i
B. s>i
C. s<i
D. s=0
Correct : C. s<i
76. Value of MPC is
A. >1
B. <1
C. 0
D. 0≤ mpc ≥1
Correct : D. 0≤ mpc ≥1
77. Schedule that expressesrelationship between rate of interest and corresponding amount of investment
A. mei
B. mec
C. effective demand
D. aggregate demand
Correct : A. mei
78. Net investment is
A. value of gross minus subsidies
B. investment after providing for depreciation
C. value of gross output before providing forsubsidies
D. none of the above
Correct : B. investment after providing for depreciation
79. MEC is directly related to
A. prospective yield
B. supply price
C. rate of interest
D. all of the above
Correct : A. prospective yield
80. According to Keynes the most important determinant ofconsumption
A. rate of interest
B. saving
C. income
D. investment
Correct : C. income
81. In the Keynesian two sector economy, AD<AS, then
A. s=i
B. s>i
C. s<i
D. s=0
Correct : B. s>i
82. In the equation C = 60 + 0.6 Y, MPCis
A. 60
B. 0.6
C. 0
D. 1
Correct : B. 0.6
83. Keynes assumed thepresence of --------- economy for the fundamental law of consumption
A. capitalistic
B. socialistic
C. planned
D. none of the above
Correct : A. capitalistic
84. According to Keynes the most important determinant ofinvestment
A. mec
B. effective demand
C. aggregate demand
D. rate of interest
Correct : A. mec
85. When disposable income risesfrom Rs 500 to Rs 600 and consumption expenditure changes from Rs 470 to Rs 560, MPC will be equalto
A. 900
B. 100
C. 0.9
D. 1
Correct : C. 0.9
86. In a two sector economy, aggregate demand is equalto
A. c+i
B. c+s
C. s+i
D. all of the above
Correct : A. c+i
87. In Keynesian terminology, investment means:
A. financial investment
B. real investment
C. induced investment
D. none of the above
Correct : B. real investment
88. Rate of change in savings to change in income:
A. aps
B. apc
C. mps
D. mpc
Correct : C. mps
89. Keynesian economics is also known as:
A. supply side economics
B. monetary economics
C. rational expectations
D. depression economics
Correct : D. depression economics
90. Which of the following can cause shifts in consumption function:
A. psychological attitude
B. social practices
C. business motives
D. changes in price level
Correct : D. changes in price level
91. APC is determined by the following equation:
A. c/y
B. s/y
C. ∆c/∆y
D. ∆s/∆y
Correct : A. c/y
92. In the Keynesian two sector model, when AD = AS, then:
A. s<i
B. s>i
C. s=i
D. i=0
Correct : C. s=i
93. Which of the following is not correct:
A. mpc declines as income increases
B. mpc is positive but less than one
C. mps is always positive
D. all the above
Correct : C. mps is always positive
94. According to Keynes, saving is:
A. private virtue but not social virtue
B. private and social virtue
C. is neither private virtue nor social virtue
D. is either social virtue or private virtue
Correct : A. private virtue but not social virtue
95. MEC isinversely related to:
A. prospective yield
B. supply price
C. investment
D. rate of interest
Correct : A. prospective yield
96. Keynes considered subjective and objective factors:
A. important determinants of consumption
B. unimportant determinants of consumption
C. determinants of investment
D. determinants of business’s willingness to pay
Correct : B. unimportant determinants of consumption
97. The sum of marginal propensity to consume plus marginal propensity to save must equal to:
A. 0
B. 1
C. 100
D. 1000
Correct : B. 1
98. Keynesian economics is:
A. macro
B. micro
C. both
D. none
Correct : A. macro
99. The MEC increases when:
A. capitalstock increases
B. capitalstock decreases
C. capital remains constant
D. none of the above
Correct : B. capitalstock decreases
100. Which of the following is correct?
A. 1+mps =mpc
B. 1- mpc =mps
C. mpc + mps >1
D. mpc+ mps<1
Correct : B. 1- mpc =mps