3. Velocity of circulation of money means the number of times a unit of money
Correct : C. Changes hands annually
4. The equation of exchange PT = MV was given by:
Correct : A. Fisher
5. When value of money falls, they benefit more:
Correct : D. Debtors
6. When the nation's money supply is Rs. 1200 billion and GDP is Rs. 4800 billion, velocity of circulation money is:
Correct : B. 4
7. Which one is equation of exchange?
Correct : A. PT = MV
8. Inflation can be controlled by applying:
Correct : A. Monetary and fiscal policies
9. Inflation is a situation when:
Correct : B. General price level rises continuously
10. Under normal circumstances, the velocity of circulation of money in a country is:
Correct : C. Less than 10
11. According to Keynes, demand for money is affected by:
Correct : D. Both (a) & (b)
12. During inflation:
Correct : A. Lenders lose, borrowers gain
13. The quantity demanded of money rises:
Correct : B. As the interest rate falls
14. Which people are most likely to gain during inflation?
Correct : C. Those who are repaying borrowed money
15. If quantity of money increases 100%, other things remaining constant, value of money changes by:
Correct : B. Decreases by 100%
16. For the economy, prices are beneficial:
Correct : B. Rising slowly
17. Value of money means:
Correct : B. General purchasing power of money
18. Value of money and supply of money are related:
Correct : A. Inversely
19. They are not affected badly by rising prices:
Correct : B. Businessmen
20. Inflation:
Correct : B. Makes distribution of income unequal
21. It is assumption of quantity theory of money:
Correct : B. Velocity of circulation of money constant
22. If we put this letter in the blank space, we get quantity theory of money PY = M
Correct : C. V
23. In the equation PY = MV showing quantity theory of money. Y represents:
Correct : B. National income
24. Demand-pull inflation may be caused by:
Correct : B. A reduction in interest rates
25. Inflation:
Correct : D. Reduces the purchasing power of a Rupee
26. An increase in injections into the economy may lead to:
Correct : A. An outward shift of aggregate demand and demand-pull inflation
27. According to the Phillips curve, unemployment will return to the natural rate when:
Correct : B. Real wages are back at long-run equilibrium level
28. What is the cause of inflation?
Correct : C. If money supply increases and production falls.
29. What does the inflation imply?
Correct : D. Rise in general price index.
30. How the inflation can be checked temporarily?
Correct : B. Decrease in money supply
31. Which groups are not protected from inflation?
Correct : B. Agricultural farmers
32. Which of the following cannot be included among the remedies of inflation?
Correct : B. by making low bank rate
33. What is Cost-Push inflation?
Correct : B. Increasing indirect tax
34. Inflation is the state in which ..............................
Correct : A. The value of money decreases
35. Which of the following class will not be negatively affected by the higher inflation?
Correct : D. Business class
36. Which of the following is an effect of inflation?
Correct : D. All the above
37. Excess demand for money, according to Say’s law in the Economy:
Correct : D. There is no relationship between excess demand for money and Say’s Law
38. Which of the following is not an assumption of classical theory?
Correct : B. Unemployment
39. In classical theory the equality between saving and investment is brought about by:
Correct : A. Rate of interest
40. The normal condition of a capitalist economy in classical theory is:
Correct : B. Full employment
41. In classical theory of employment, there is the possibility of:
Correct : A. Voluntary unemployment
42. “Supply creates its own demand “is a law of:
Correct : D. Market
43. According to classical economists, variations in savings are due to:
Correct : B. Rate of interest
44. Supply creates its own demand is the Basis of:
Correct : A. Classical economics
45. Which policy is effective in the Keynesian range?
Correct : B. Fiscal policy
46. When output exceeds spending:
Correct : A. There is unsold output, and level of output will fall
47. Saving is a function of
Correct : D. Income
48. Entrepreneurs will have no tendency to expand or contract output and employment when
Correct : C. AD=AS
49. The slope of the consumption function is called
Correct : A. MPC
50. The concept of effective demand is associated with the name of
Correct : B. Keynes
51. Psychological law of consumption states that the value of MPC is lies between zero and
Correct : A. 1
52. Net investment is also known as
Correct : D. Capital formation
53. In the saving function S = -a + 1-b(Y), the term ‘b’ denotes
Correct : B. MPC
54. Who propounded Psychological law of consumption
Correct : C. Keynes
55. When MPS = 0.2, MPC will be
Correct : A. 0.8
56. In the linear consumption function C = a + b(Y), coefficient ‘a’ denotes
Correct : C. Autonomous consumption
57. In the equation C = 60 + 0.6 Y, MPC is
Correct : B. 0.6
58. Keynes assumed the presence of --------- economy for the fundamental law of
consumption
Correct : A. Capitalistic
59. Which of the following is a union tax?
Correct : A. Corporation tax
60. Which of the following is not a union tax?
Correct : C. Tolls
61. The tax levied by the union government on income of individuals is known as
Correct : A. Personal income tax
62. The tax on net income of companies is
Correct : D. Corporate tax
63. The most important source of revenue to the states is
Correct : A. Sales tax
64. The difference between revenue expenditure and revenue receipts is
Correct : A. Revenue deficit
65. The difference between total expenditure and total receipts is
Correct : B. Budget deficit
66. Maximum Social Advantage is achieved,
Correct : A. at the point where the marginal social benefit of public expenditure and the marginal social sacrifice of taxation are equated
67. Which one of the following economists introduced the principle of “Maximum Social Advantage”?
Correct : D. Hugh Dalton
68. In a free market economy, self-interested individuals operate through a system of mutual interdependence
to promote the general benefit of society at large. Adam Smith referred this as:
Correct : A. Invisible hand
69. The role of Government would be highest in which of the following type of economy:
Correct : D. Socialist Economy
70. Taxes are levied to
Correct : A. Provide general benefits to the People
71. Which of the following factors contribute to public debt of a country?
Correct : D. All of the above
72. Which of the following are the causes of public debt of a country?
Correct : D. All of the above
73. Which of the following statement is INCORRECT with regard to the burden of public debt of a country?
Correct : C. In case of Internal Debt, the direct money burden on the economy is huge as transfer of wealth happens within the community
74. Public Debt means
Correct : D. Borrowing by a Government from within the country or from abroad, from private individuals or association of individuals or from banking and non-banking institutions
75. Debt obligations of the government that have maturities of one year or less is normally called
Correct : C. Treasury Bills
76. Which of the following could be a reason for raising public loans by a country?
Correct : D. All of the above
77. Public Debt has a secular tendency to go up in every country. Which of the following are reasons contributing
to such a trend?
Correct : D. All of the above
78. Expenditure incurred by the Government on building durable assets, like highways, multipurpose dams,
irrigation projects are in the nature of
Correct : A. Capital Expenditure
79. Which of the following describes the situation where revenues and expenditures are equal during a given
period?
Correct : C. Balanced Budget
80. Old age pension is “National Old Age Pension Schemes”, “Interest payments”, “Subsidies”, “Unemployment allowances”, “Welfare benefits to weaker sections, etc.” By incurring such expenditure, the government does not get anything in return, but it adds to the welfare of the people, especially belong to the weaker sections of the society. Such expenditure basically results in redistribution of money incomes within the society.
Correct : B. Transfer Expenditure or transfer payments
81. With increase in urbanization and industrialization, the role of Government started:
Correct : B. Increasing
82. The ratio of change in the national income in relation to the change in government spending that causes it is
referred to as:
Correct : A. Fiscal Multiplier
83. Expenditures incurred on civil administration, defence forces is in the nature of
Correct : B. Revenue Expenditure
84. The practice by Governments in which a government spends more money than it receives as revenue is
referred to as:
Correct : C. Deficit financing
85. Expenditure on defence, interest payments, law and order maintenance and public administration expenses
are generally treated as:
Correct : B. Unproductive Expenditure
86. Developmental expenditure refers to
Correct : C. Expenditure which is incurred on activities directly related to economic development
87. The multiplier effect is best described as:
Correct : A. the increase in final income arising from any new injection of spending
88. The trough of a business cycle occurs when _____ hits its lowest point.
Correct : C. aggregate economic activity
89. The low point in the business cycle is referred to as the
Correct : C. trough.
90. When aggregate economic activity is increasing, the economy is said to be in
Correct : A. an expansion.
91. In a boom:
Correct : A. Unemployment is likely to fall
92. Peaks and troughs of the business cycle are known collectively as
Correct : B. turning points.
93. When aggregate economic activity is declining, the economy is said to be in
Correct : A. a contraction.
94. Industries that are extremely sensitive to the business cycle are the
Correct : D. capital goods and durable goods sectors.
95. Economists use the term shocks to mean
Correct : B. typically, unpredictable forces that have major impacts on the economy.
96. Primarily, macroeconomists use microeconomic principles to study
Correct : D. long-run economic growth and business cycles.
97. The two most important American business cycle events of the twentieth century were
Correct : B. World War II and the Great Depression.
98. According to real business cycle theory, the primary causes of business cycles are
Correct : C. technology shocks.
99. The macroeconomic models that are most supportive of the role of government policy aimed at
smoothing business cycles are
Correct : C. Keynesian models.
100. Business cycles are
Correct : D. similar, but they can have many causes.