1. In classical theory which of the following is found in the economy:
Correct : D. Full employment
2. In MV=PT, if M doubles and V and T remain constant, then P will:
Correct : A. Double
3. Pigou’s version of Cambridge equation is:
Correct : B. P= KR/M
4. The quantity theory of money was restated by:
Correct : B. Milton Friedman
5. The law which states that supply creates its own demand and overproduction is
impossible is known as:
Correct : B. Say’s law of market
6. Wages and prices do not adjust quickly to restore general equilibrium is a property of
Correct : B. Keynesian economics
7. Classicals treated money as a:
Correct : A. Medium of exchange
8. When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:
Correct : B. Rightward
9. An Economic model is a statement of relationship among economic ------
Correct : A. Variables
10. LM curve shows the equilibrium condition in ---------- market
Correct : C. Money market
11. Supply creates its own demand is the Basis of:
Correct : A. Classical economics
12. The simplest ISLM model consists of:
Correct : A. Two markets
13. The equilibrium in the product market is represented by which curve?
Correct : A. IS
14. The IS curve has a ------slope
Correct : B. Negative
15. The LM curve has a ----- slope
Correct : A. Positive
16. ISLM model was developed by:
Correct : A. Hicks
17. The perfectly elastic segment of the LM curve is:
Correct : A. Keynesian range
18. Which policy is effective in the Classical range?
Correct : A. Monetary policy
19. Which policy is effective in the Keynesian range?
Correct : B. Fiscal policy
20. Which policy is effective in the intermediate range?
Correct : C. Both policies
21. IS-LM model was developed by:
Correct : C. J.R.Hicks
22. Frictional unemployment exists:
Correct : B. Because it takes time to find a job when one is first entering the labour force
23. The natural rate of unemployment equals the sum of those who are:
Correct : A. Frictionally and structurally unemployed
24. The marginal productivity of labour:
Correct : B. Decreases when there is an adverse supply shock, ceteris paribus
25. When saving is greater than investment in a two-sector model,
Correct : B. Output should decrease
26. When output exceeds spending:
Correct : A. There is unsold output, and level of output will fall
27. When investment is negatively related to the rate of interest, equilibrium output in the
goods market:
Correct : B. Is inversely related to the rate of interest
28. Simultaneous equilibrium in the money (LM) and goods (IS) market exists:
Correct : B. At only one output level and rate of interest
29. In which of the following situations will an increase in the money supply have no effect
upon output?
Correct : C. LM is steeply sloped and IS is vertical
30. Policy Neutrality is the main proposition of:
Correct : D. Rational expectations hypothesis
31. Who invented the General Equilibrium analysis?
Correct : A. L. Walras.
32. Employment equilibrium in the Classical theory is achieved through:
Correct : A. Wage-Price flexibility.
33. Market does not clear is a proposition of:
Correct : B. Keynesian Economics
34. The interest rate paid on bonds is known as:
Correct : B. Coupon rate
35. The monetary policy is completely ineffective when the LM curve is:
Correct : B. Horizontal.
36. Changes in the subjective or objective factors
Correct : D. They cause upward or downward shifts in consumption function
37. Saving is a function of
Correct : D. Income
38. Entrepreneurs will have no tendency to expand or contract output and employment
when
Correct : C. AD=AS
39. The slope of the consumption function is called
Correct : A. MPC
40. The concept of effective demand is associated with the name of
Correct : B. Keynes
41. In a closed economy, the value of multiplier , when MPC is 0.90
Correct : C. 10
42. Income is a ------- variable
Correct : A. Flow
43. Ratio of consumption expenditure to any particular level of income
Correct : C. APC
44. Psychological law of consumption states that the value of MPC is lies between zero and
Correct : A. 1
45. Net investment is also known as
Correct : D. Capital formation
46. In the saving function S = -a + (1-b)Y, the term ‘b’ denotes
Correct : B. MPC
47. Who propounded Psychological law of consumption
Correct : C. Keynes
48. When MPS = 0.2, MPC will be
Correct : A. 0.8
49. In the linear consumption function C = a + bY, coefficient ‘a’ denotes
Correct : C. Autonomous consumption
50. According to Keynes, rising aggregate income is always associated with
Correct : A. Higher saving rate
51. When MPC = 0.5, the value of multiplier is
Correct : C. 2
52. Who postulated the law Supply creates its own demand
Correct : B. J B say
53. Autonomous investment is
Correct : A. Income inelastic
54. MEC for a capital good was found out to be 10% and the market rate of interest is 9%,
then the investment is
Correct : B. Profitable
55. In the Keynesian two sector economy, AD>AS, then
Correct : C. S<I
56. Value of MPC is
Correct : D. 0≤ MPC ≥1
57. Schedule that expresses relationship between rate of interest and corresponding amount
of investment
Correct : A. MEI
58. Net investment is
Correct : B. Investment after providing for depreciation
59. MEC is directly related to
Correct : A. Prospective yield
60. According to Keynes the most important determinant of consumption
Correct : C. Income
61. In the Keynesian two sector economy, AD<AS, then
Correct : B. S>I
62. In the equation C = 60 + 0.6 Y, MPC is
Correct : B. 0.6
63. Keynes assumed the presence of --------- economy for the fundamental law of
consumption
Correct : A. Capitalistic
64. According to Keynes the most important determinant of investment
Correct : A. MEC
65. 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
Correct : C. 0.9
66. In a two sector economy, aggregate demand is equal to
Correct : A. C+I
67. In Keynesian terminology, investment means:
Correct : B. Real investment
68. Rate of change in savings to change in income:
Correct : C. MPS
69. Keynesian economics is also known as:
Correct : D. Depression economics
70. Which of the following can cause shifts in consumption function:
Correct : D. Changes in price level
71. APC is determined by the following equation:
Correct : A. C/Y
72. In the Keynesian two sector model, when AD = AS, then:
Correct : C. S=I
73. Which of the following is not correct:
Correct : C. MPS is always positive
74. According to Keynes, saving is:
Correct : A. Private virtue but not social virtue
75. MEC is inversely related to:
Correct : A. Prospective yield
76. Keynes considered subjective and objective factors:
Correct : B. Unimportant determinants of consumption
77. The sum of marginal propensity to consume plus marginal propensity to save must
equal to:
Correct : B. 1
78. Keynesian economics is:
Correct : A. Macro
79. The MEC increases when:
Correct : B. Capital stock decreases
80. Which of the following is correct?
Correct : B. 1- MPC = MPS
81. Starting point of Keynesian economics is:
Correct : A. Effective demand
82. Keynesian three sector model consist of:
Correct : B. Households, business, government
83. A substantial increase in the rate of interest can cause:
Correct : C. All the above
84. Functional relationship between saving and disposable income is:
Correct : A. Saving function
85. As the value of MPC increases, the value of multiplier:
Correct : B. Increases
86. Who among the following pioneered the first real estimate of national income?
Correct : C. William Petty
87. Who argued that national income is simply equal to “net product of agriculture”?
Correct : B. Physiocrats
88. Who argued that “Everything that is produced in the course of a year, every service
rendered, every fresh utility brought about is a part of the national wealth.”?
Correct : C. Alfred Marshall
89. Who made the first major attempt to estimate national income in a somewhat
comprehensive manner?
Correct : C. Simon Kuznets
90. Consumption of capital good in the process of production is called as
Correct : B. Depreciation
91. Which one of the following is roughly equal to national income?
Correct : B. NNP
92. Which one of the following includes ‘income of residents’?
Correct : B. NNP
93. Remittances made by NRIs to India in the context of national income accounting is
called as
Correct : C. Factor Payments
94. Who first introduced the concept of circular flow of income?
Correct : D. Fancois Quesnay
95. Which one in the following is a stock variable?
Correct : C. Capital
96. Which one in the following is a flow variable?
Correct : D. GDP
97. Why do not the sale or purchase of used goods are not included in the GDP?
Correct : C. Used goods are included in the previous GDP calculations
98. Inventories are unsold goods produced by a firm, then why do they are included in GDP?
Correct : C. They are purchases by the firm itself
99. The value of ‘intermediate goods’ are excluded from GDP calculation because:
Correct : B. It results in multiple counting of same value
100. Value added at each stage of production means: