Quiznetik
Macroeconomics Theories and Policies 1 | Set 1
1. The most important determinant of consumption and saving is the:
A. price level.
B. level of income.
C. interest rate.
D. level of bank credit.
Correct : B. level of income.
2. As disposable income goes up, the:
A. average propensity to consume falls.
B. volume of investment diminishes.
C. average propensity to save falls.
D. volume of consumption declines absolutely
Correct : A. average propensity to consume falls.
3. The investment demand curve suggests:
A. that changes in the real interest rate will not affect the amount invested.
B. there is a direct relationship between the real rate of interest and the level of investment spending.
C. that an increase in business taxes will tend to stimulate investment spending.
D. there is an inverse relationship between the real rate of interest and the level of investment spending.
Correct : D. there is an inverse relationship between the real rate of interest and the level of investment spending.
4. Other things equal, if the real interest rate falls and business taxes rise:
A. we can be certain that investment will rise.
B. investment will rise until it is equal to saving.
C. we can be certain that investment will fall.
D. we will be uncertain as to the resulting change in investment.
Correct : D. we will be uncertain as to the resulting change in investment.
5. Which of the following statement is inconsistent with Say’s Law
A. the economy has flexible wages and prices.
B. the economy’s level of investment solely depends on the level of income.
C. the economy will produce at full employment level of output.
D. the economy has an environment of”laissez faire”
Correct : B. the economy’s level of investment solely depends on the level of income.
6. An increase in investment is caused by
A. lower interest rates
B. expectations of lower national income
C. a decrease in the marginal propensity to consume
D. an increase in withdrawals
Correct : A. lower interest rates
7. Which type of bank deals with short term credit?
A. agricultural bank
B. industrial bank
C. commercial bank
D. none of these
Correct : C. commercial bank
8. Demand pull inflation may be caused by
A. an increase in cost
B. a decrease in interest rate
C. a reduction in government spending
D. an outward shift of aggregate supply
Correct : B. a decrease in interest rate
9. An increase in aggregate demand is more likely to lead to demand pull inflation
A. if aggregate supply is completely elastic
B. if aggregate supply is completely inelastic
C. if aggregate supply is unitary elastic
D. if aggregate supply is moderately elastic
Correct : B. if aggregate supply is completely inelastic
10. Which of the following is an example of fiscal policy
A. change in interest rate
B. change in tax rate
C. controlling money supply
D. manipulating bank rate
Correct : B. change in tax rate
11. The Cambridge version of the quantity theory of money was developed by:
A. fisher
B. alfred marshall
C. pigou
D. keynes
Correct : C. pigou
12. Investment is reckoned by which method for computingGDP:
A. income method
B. productmethod
C. expenditure method
D. value added method
Correct : C. expenditure method
13. Who argued that national income issimply equal to “net product of agriculture”?
A. .mercantilists
B. physiocrats
C. classical economists
D. neo classical economists
Correct : B. physiocrats
14. A period of expansion and contraction measured by real GDP is called
A. business cycle
B. expansion
C. recession
D. contraction
Correct : A. business cycle
15. Dissaving means:
A. that households are spending more than their current incomes.
B. the same thing as disinvesting.
C. that saving and investment are equal.
D. that disposable income is less than zero.
Correct : A. that households are spending more than their current incomes.
16. Which one of the following will cause a movement up along an economy's saving schedule?
A. an increase in interest rates.
B. an increase in household borrowing.
C. an increase in disposable income.
D. an increase in stock prices.
Correct : C. an increase in disposable income.
17. A tax increase shifts the IS curve to the
A. left, causing output and interest rates to fall.
B. left, causing output and interest rates to increase.
C. right, causing output and interest rates to fall.
D. right, causing output and interest rates to rise.
Correct : A. left, causing output and interest rates to fall.
18. Factors that cause the IS curve to shift include
A. changes in autonomous consumer spending.
B. changes in government spending.
C. changes in investment spending related to a change in the interest rate.
D. only (a) and (b) of the above.
Correct : D. only (a) and (b) of the above.
19. In the long-run ISLM model, the long-run effect of a cut in government spending is to
A. increase real output and the interest rate.
B. increase real output and not affect the interest rate.
C. not affect real output and increase the interest rate.
D. not affect real output and reduce the interest rate.
Correct : D. not affect real output and reduce the interest rate.
20. In the long-run ISLM model, the long-run effect of a tax cut is to
A. increase real output and the interest rate.
B. increase real output and not affect the interest rate.
C. not affect real output and increase the interest rate.
D. not affect real output and reduce the interest rate.
Correct : C. not affect real output and increase the interest rate.
21. In the long-run ISLM model, the long-run effect of an autonomous increase in investment is to
A. increase real output and the interest rate.
B. increase real output and not affect the interest rate.
C. not affect real output and increase the interest rate.
D. not affect real output and reduce the interest rate.
Correct : C. not affect real output and increase the interest rate.
22. In the long-run ISLM model, the long-run effect of a fall in net exports is to
A. increase real output and the interest rate.
B. increase real output and not affect the interest rate.
C. not affect real output and increase the interest rate.
D. not affect real output and reduce the interest rate.
Correct : D. not affect real output and reduce the interest rate.
23. Who invented the General Equilibrium analysis?
A. l. walras.
B. w. leontief
C. j.m.keynes.
D. none of these.
Correct : A. l. walras.
24. 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.
25. Market does not clear is a proposition of:
A. neoclassical theory.
B. keynesian economics
C. monetarism
D. rational expectations
Correct : B. keynesian economics
26. 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