JUPEB MCQ QUESTIONS
ON ECONOMICS (ECN 001 & ECN 002)
1.
Scarcity
exists because? A. Resources are limited
while human wants are unlimited. B. We are unable to have many goods as we
would like to have. C. Resources will likely be eliminated as technology
continues to expand. D. is not an issue addressed in economics. ANS A
2.
People
are forced to make choices because? A. Unlimited wants and unlimited resources.
B. Limited wants and unlimited resources. C. unlimited wants and limited resources.
D. limited wants and limited resources. ANS
C
3.
Which
of the following is the most accurate definition of economics? A. Economics is
the study of stock and bond. B. Economics is the study of how people allocate
unlimited resources. C. Economics is the study of how consumers choose to spend
their income. D. Economics is the study of how the society chooses to allocate
scarce resources. ANS D
4.
The
basic differences between macroeconomics and microeconomics are: A. Microeconomics
concentrates on individual market while macroeconomics focus primarily on
international trade. B. microeconomics concentrates on the behaviour of
individual consumers while macroeconomics focuses on the behaviour of firms. C.
Microeconomics concentrates on the behaviour of individual consumers and firms
while macroeconomics focuses on the performance of the entire economy. D.
Microeconomics explores the causes of inflation while macroeconomics focuses on
the causes of unemployment. ANS C
5.
Economics
according to its definition studies how people A. Earn and spend money. B.
Invest in stock and bond markets. C. make choices in the face of scarcity. D.
make choices in the face of uncertainty. ANS
C
6.
An
economic model is A. a plastic version of the economy. B. a complete depiction
of reality. C. an abstraction from reality. D. modification of economic reality.
ANS C
7.
Which
of the following best describes the concept of pareto optimality A. welfarism
B. utility C. efficiency D. Consumption. ANS
C
8.
Marginal
cost means the cost difference that occurs in production in every unit change
in output A. True B. False C. Likely to be true D. None of the above. ANS A
9.
The
demand curve slopes A. downward from right to left. B. downward from left to
right. C. upward from left to right. D. upward from right to left. ANS B
10. The supply curve slopes A. downward
from right to left. B. downward from left to right. C. upward from left to
right. D. upward from right to left. ANS
D
11. The main reason of engaging any of
the factors of production is A. benefits derived B. its marginal productivity
C. its price D. Its profit. ANS B
12. Which of the following is very
central and fundamental to the theory of consumer behaviour A. utility B.
utility maximization C. Demand D. Model. ANS
B
13. According to demand, there is an
inverse relationship between price and quantity demanded A. True B. False C.
neither true nor false D. either true or false. ANS A
14. The elasticity of one variable with
respect to another variable between two given points is A. point elasticity B.
Arc elasticity C. Income elasticity D. Cross elasticity. ANS B
15. If the cost of 10 books is N100 and that of 11 books
is N110. What is the marginal cost A. 100 B. 110 C. 10 D. 20. ANS C
16. The following are the causes of shift
in demand EXCEPT A. change in income B. change in price C. change in fashion D.
changes in price of substitutes. ANS B
17. When demand is perfectly inelastic,
an increase in price will result in A. a decrease in total revenue B. an
increase in total revenue C. no change in total revenue D. a decrease in
quantity demanded. ANS B
18. When demand is elastic, an increase
in price will result in A. a decrease in total revenue B. an increase in total
revenue C. no change in total revenue D. a decrease in quantity demanded. ANS A
19. When demand is unitary elastic, an
increase in price will result in A. a decrease in total revenue B. an increase
in total revenue C. no change in total revenue D. a decrease in quantity
demanded. ANS C
20. The implicit cost incurred by an
entrepreneur in producing a given commodity consists of A. the amount he could
not earn in the best alternative use of his time and money B. the amount he
could earn in the best alternative use of his time and money C. the amount he
could earn using his time and money D. none of the above. ANS B
21. Explicit costs are A. those money
outlays made by the firm to meet the direct cost of production B. Those cost
that are incurred in borrowing from banks C. the economics and the implicit
cost make up explicit cost D. this is same as wages costs. ANS A
22. The measure of the change in quantity
demanded to a very small change in price is known as A. point elasticity B. Arc
elasticity C. Income elasticity D. cross elasticity ANS A
23. Perfectly inelastic demand occurs A.
when quantity demanded does not respond to changes in price B. when quantity
demanded does respond to changes in price C. when percentage change in quantity
demanded is equal to percentage change in price. ANS A
24. Inelastic demand occurs A. when
change in quantity demanded is greater than change in price. B. when quantity
demanded does not respond to changes in price C. when percentage change in
quantity demanded is equal to percentage change in price D. when percentage
change in quantity demanded is less than percentage change in price. ANS D
25. 0<Ed<1, where Ed represents
elasticity of demand, the equation can be interpreted as A. Inelastic demand B.
Elastic demand C. Perfectly elastic demand D. None of the above. ANS A
26. Marginal revenue product of a factor
is A. MP x P B. MP x MC C. MP x MR D. None. ANS C
27. Economic problem occurs when A. there
is scarcity relative to demand B. There are no buyer for our goods C. Many
people are out of work D. All raw materials are scares. ANS A
28. The type of unemployment that occurs
when an individual cannot find job as a result of obsolete skill is A.
frictional unemployment B. structural unemployment C. classical unemployment D.
cyclical unemployment. ANS B
29. An increase in total output (real
GDP) causes the demand for money to ...... and the interest rate to....... A. Increase, increase B. Increase, decrease
C. decrease, decrease D. decrease, increase. ANS A
30. The theory of consumption which
argues that consumption is based on a household’s long-run estimate of their
income is called the A. relative income hypothesis B. Duesenberry theory C.
Permanent income hypothesis D. life cycle hypothesis. ANS D
31. The term investment in macroeconomics
means A. the total amount of capital goods in the country B. total amount of
money invested in bonds and stocks C. profit D. the production of goods for
immediate consumption. ANS A
32. The velocity of money is A. the money
supply multiplied by the price level B. The real money supply divided by the
real GDP C. the ratio of real GDP to the real money supply D. the money supply
divided by the price level. ANS C
33. The theory of ..............was
propounded by.......... A. Absolute advantage; David Ricardo B. Absolute advantage; Adam Smith C.
Comparative advantage; Adam Smith D. Comparative advantage, Mercantilists. ANS A
34. A major factor contributing to
productivity is A. labour force B. rate of GDP per year C. Immigration of young
workers D. factors of production. ANS A
35. Among all determinant of economic
growth, the most important one is A. Land and natural resources B. Human
capital C. technologies D. increased GDP. ANS
D
36. The demand for money will fall if A. real
GDP rise B. real interest rate rise C. the GDP deflator rises D. real interest
rate falls. ANS B
37. Which of the following is an example
of expansionary monetary policy by the central bank A. Increasing discount rate
B. Increasing the reserve requirement C. decreasing discount rate D. selling of
government securities. ANS A
38. Part-time workers who desire
full-time employment are A. underemployed and contribute to the unemployment
statistics B. underemployed but do not contribute to the unemployment
statistics C. Not part of the labour force and do not contribute to the
unemployment statistic. D. cyclical unemployment. ANS A
39. An increase in money income with
constant price results in A. inward parallel shift in the budget line B.
outward shift in the budget line C. budget line remain constant. D Option A
& C. ANS B
40. Which of the following is not
concerned with macroeconomics A. aggregate level of output B. general level of
prices C. growth of real output D. price of a commodity. ANS D
41. The marginal propensity to consume is
A. ∆c/∆Yd B. the slope of the consumption function C. ∆Yd/∆c D. A & B. ANS D
42. An industry is A. a group of firms
producing differentiated goods B. A group of firms producing distinct
commodities C. a group of firms producing related goods D. a group of firms
producing similar but differentiated goods. ANS C
43. The principle that specified that the
amount, when and how to pay tax should be made known to the tax payer is known
as A. principle of convenience B. principle of economy C. principle of
simplicity D. principle of certainty. ANS D
44. If commodity X and Y are substitute,
their cross elasticity of demand will be A. positive B. negative C. zero D. one.
ANS A
45. The type of price elasticity of
demand for a commodity whose quantity demanded remains unchanged despite
changes in price is A. inelastic B. perfectly inelastic C. infinitely elastic
D. perfectly elastic. ANS B
46. A rise in naira per dollar exchange
says from N157/$1 to N160/$1 means A. naira has depreciated B. naira has
appreciated C. naira has increased D. dollar has increased. ANS A
47. One of the following is not a measure
of inflation A. Consumer price index B. wholesaler price index C. real gross
domestic index D. producer price index. ANS
C
48. Real cost is A. alternative
commodities forgone B. cost of goods and services C. amount of money spent on
goods and services D. true cost. ANS A
49. The development of an economic hypothesis
through intuition, insight, or logic is associated with A. Induction B.
Deduction C. Positive economics D. Normative economics. ANS D
50. The part of income after tax that is
not consumed is defined as A. Saving B. Capital investment C. Wages and salaries
D. Non-durable goods expenditure. ANS A
51. Which of the following is a
characteristics of perfect competition A. small number of buyers and sellers B.
large number of buyers and sellers C. perfect knowledge of information D. B
& C. ANS D
52. When total utility increase, marginal
utility is A. negative, increasing B. negative, decreasing C. positive,
decreasing D. positive, increasing. ANS
C
53. At equilibrium, the slope of the
indifference curve is A. equal to the slope of budget line B. equal to the
slope of the indifference map C. equal to the slope of the isocost D. equal to
the slope of the isoquant. ANS A
54. The line joining points of consumer
equilibrium resulting when only the consumer’s income is varied is called A.
the demand curve B. the income consumption curve C. the engle curve D. the
price consumption curve. ANS B
55. Within the relevant range, isoquants
A. are negatively sloped B. positively sloped C. are convex to the origin D.
cannot intersect. ANS C
56. The LAC curve falls as output
expands; this fall is due to A. economies of scale B. law of diminishing return
C. diseconomies of scale D. none of the above. ANS A
57. Which of the following industries
most closely approximates an oligopoly model A. telecommunication industry B.
newspaper C. cigarette D. broking firm ANS
A
58. Total profit are maximized where A.
TR equals TC B. TR and TC curves are parallel C. TR and TC curve are parallel
and TC equals TR D. TR and TC curve are parallel and TR is greater than TC. ANS D
59. When the perfectly competitive firm
and industry are both in long-run equilibrium A. P=MR=SMC-LMC B. P=MR=SAC=LAC
C. P=MR=lowest point on LAC D. all of the above ANS B
60. A supply curve that is vertically
straight would indicate that A. there was a maximum price below which no supply
was forthcoming B. every increase in price would increase the quantity supplied
C. the quantity supplied was very responsive to price D. the same quantity
would be supplied whatever the price. ANS
D
61. A demand curve which is a horizontal
straight line has an elasticity that is A. zero B. greater than one C. infinite
D. less than one. ANS C
62. Utility of every additional unit is
called a. Marginal utility b. Total utility c. Average utility d. None of
these. ANS A
63. MUn is equal to a. TUn + TUn-1 b. TUn – TUn-1
c. TUn – TUn+1 d. TUn + TUn+1
64. When total utility reaches at maximum marginal
utility becomes a. Positive b. Negative c. Zero d. All may be possible. ANS B
65. The cardinalist school postulated that utility
can a. Be measured b. Not be measured c. Both a and b may possible d. None. ANS C
66. The law of equi- marginal utility is
also known as a. Gossen’s first law b. Gossen’s second law c. Gossen’s third
law d. None of the above. ANS A
67. Gossen, Jevons, Walras and Marshall are
related to a. Cardinal school b. Ordinal school c. Both a & b d. None of
the above. ANS B
68. The ordinalist school postulated that utility
is a. Measurable b. Not measurable c. Both a & b may be possible d. None. ANS A
69. Pareto, W. E. Johnson, E. E. Slutsky, J. R.
Hicks and R.G.D. Allen are the main economists related to a. Cardinal school b.
Ordinal school c. Both schools d. None of the above. ANS B
70. As the consumer consumes more of a commodity,
the utility of every additional unit (MU) consumed diminishes. This is a. Law
of diminishing marginal utility b. Equi- marginal utility c. Indifference curve
theory d. Revealed preference theory. ANS
A
71. The condition for equilibrium of the
consumer is a. 𝑀𝑈𝑥/𝑃𝑥 = 𝑀𝑈𝑦/𝑃𝑦 b. 𝑀𝑈𝑥/𝑀𝑈𝑦 = 𝑃𝑦 /𝑃𝑥 c. a&b d. MUx= MUy ANS C
72. The cardinal utility approach is
based on a. Rationality b. Constant marginal utility of money c. Diminishing
marginal utility d. All of the above. ANS
D
73. What is/ are true for indifference
curves a. Indifference curve slopes downward to the right; b. Indifference
curves are convex to the origin; c. A higher indifference curve represents a
higher level of satisfaction; d. All of the above are correct. ANS D
74. The convexity of indifference curve
is due to a. Diminishing MRS b. Increasing MRS c. Constant MRS d. None. ANS A
75. The slope of indifference curve is known as a.
Marginal Rate of Substitution; b. Marginal Utility; c. Elasticity of Substitution;
d. None. ANS A
76. . In indifference curve analysis, the
consumer will be in equilibrium when a. A given budget line must be tangent to
an indifference curve b. The indifference curve must be convex to the origin at
the point of tangency c. Both a & b d. None of the above. ANS C
77. The ease with which one good can be
substituted for the other is called a. Elasticity of substitution; b. Marginal
rate of substitution; c. Substitution effect; d. None of the above. ANS A
78. A change in price of good X brings
about a change in the quantity demanded of it, ceteris paribus. This change in
the quantity demanded is called a. Price effect; b. Income effect; c.
Substitution effect; d. None. ANS B
79. The increase in the quantity bought
as the price of the commodity falls, after adjusting income so as to keep the
real purchasing power of the consumer the same before is known as a. Price
effect; b. Income effect; c. Substitution effect; d. None. ANS C
80. A change in the price of a good will bring
about a change in the real income (purchasing power) of the consumer, which in
turn brings about a change in the quantity demanded of the good is called a.
Price effect; b. Income effect; c. Substitution effect; d. None. ANS B
81. Price effect is equal to a.
Substitution effect; b. Income effect; c. a+b d. a-b. ANS C
82. Revealed preference theory was developed by a.
Paul A. Samuelson b. J. R. Hicks c. Marshall d. Adam Smith ANS A
83. Revealed preference theory is based on a. Weak
ordering b. Strong ordering c. Both a & b d. None. ANS B
84. Indifference curve analysis is based on a.
Weak ordering b. Strong ordering c. Both a & b d. None. ANS A
85. The concept of elasticity of supply
was developed by a. Alfred Marshall, b. Adam Smith, c. L. Robbins, d. None of
these. ANS A
86. The responsiveness (or percentage change) of
quantity supplied of a commodity to one percentage change in its price is known
as a. Elasticity of demand, b. Elasticity of supply, c. Law of demand, d. Law
of supply ANS B
87. The coefficient of elasticity of
supply ranges from a. Zero to one, b. Zero to infinity, c. One to infinity, d.
None ANS B
88. Any straight line supply curve passing through
the origin has value of elasticity - a. Equal to one, b. Equal to infinity, c.
Greater than one, d. Less than one. ANS
A
89. The elasticity of supply relates to a
situation where the two prices and quantity situations are far from each other
is known as a. Point elasticity of supply, b. Arc elasticity of supply, c.
Elasticity of supply, d. None. ANS B
90. Which of the following is not
correctly matched a. If the value of es = 1 => Supply is unitary elastic. b.
If the value of es< 1 => Supply is inelastic. c. If the value of es = ∞
=> Supply is perfectly elastic. d. If the value of es> 1 => Supply is
perfectly inelastic. e. If the value of es = 0 => Supply is perfectly
inelastic. ANS D
91. Which is/are the determinants of
demand a. Price b. Income c. Taste and preference d. All of these. ANS D
92. Price of the good is fixed in a market by a.
Demand, b. Supply, c. Both, d. None of these. ANS C
93. The reasons for the downward slope of
demand curve area. The law of diminishing marginal utility b. Substitution
effect; c. Income effect; d. All of the above. ANS D
94. In case of change in demand a. No new demand
curve is drawn; b. New demand curve is drawn; c. Both can be possible; d. None
of these possible. ANS B
95. If an increase in the price of one leads to an
increase in the quantity demanded of the other then these goods are a.
Substitute goods; b. Complementary goods; b. c. Normal goods; d. None. ANS A
96. Demand curve slopes upward in case of
a. Veblen goods; b. Giffen goods c. Snob appeal; d. all of the above. ANS D
97. Which one is not the reason for
change in demand - a. Price of the good; b. Price of other goods; c. Income of
the consumer; d. Consumers’ taste and preferences ANS A
98. Which one is not correctly matched a. Giffen
goods……………………a superior or high quality goods. b. Substitute goods………………..tea
and coffee. c. Complementary goods………….car and petrol. d. Veblen goods………….a
prestigious goods with status symbol. ANS
A
99. Who wrote the book Wealth of Nations
a. Ragnar Frisch b. Adam Smith c. Marshall d. Robbins. ANS B
100.
Wealth of Nations was published in--- a. 1976
b. 1876 c. 1776 d. 1676. ANS C
101.
Microeconomics
and Macroeconomics was first coined by ---- a. Ragnar Frisch b. Adam Smith c.
Marshall d. Robbins. ANS A
102.
The study of the behavior of individual
decision- making units and working of individual markets in isolation is known
as----- a. General equilibrium analysis b. Partial equilibrium analysis. c.
Isolated equilibrium d. marginal equilibrium ANS B
103.
Production
function provides measurements of a. The marginal productivity of the factors
of production; b. The marginal rate of substitution and the elasticity of
substitution; c. The return to scale; d. Factor intensity; e. All of the above.
ANS E
104.
Which is/ are true about iso- quantsa. It is
convex to the origin; b. The slope of an isoquant is called marginal rate of
technical substitution of labour for capital (MRTSLK); c. Iso- quants never
cross each other; d. All are true. ANS D
105.
The
conditions of producer’s equilibrium area. Slope of isoquant = slope of iso-
cost line; b. Iso- quants must be convex to the origin; c. a+ b d. None of
these. ANS C
106.
In Cobb- Douglas production function,
elasticity of substitution (es or σ) is equal toa. unity b. zero c. infinity d.
None of these. ANS A
107.
In
Cobb- Douglas production function, the sum of its exponents measures a. Returns
to Scale; b. Factors intensity; c. Marginal productivity of factors; d.
Elasticity of substitution ANS A
108.
Slope of an iso- quant is a. MRTS; b. Marginal
productivity of factors; c. Elasticity of substitution; d. Factors intensity. ANS A
109.
.MPL
for nth unit is equal to a. TPn – TPn-1 b. TPn – TPn+1 c. APn – APn-1 d. TPn +
TPn-1 ANS A
110.
Cost
functions are derived from a. Production function; b. Demand function; c.
Supply function; d. None of these. ANS A
111.
Total
cost (TC) is equal to a. TFC + TVC b. MC + AC c. TFC + MC d. TFC + AC ANS A
112.
Which
of the following is rectangular hyperbola a. TFC b. TVC c. AFC d. AVC ANS C
113.
An addition made to the TC or TVC as output is
increased by one more units is called: a. AC b. MC c. AVC d. AFC ANS B
114.
When
MC is falling, MC is a. Below AC b. Above AC c. Equal to AC d. All may be
possible. ANS A
115.
MC
curve cuts AC curve at its a. minimum point; b. Maximum point. c. Any point; d.
Never cuts. ANS A
116.
Shift
in cost curves is/are due to– a. Change in input supply; b. Change in
technology; c. a + b d. None of these ANS
C
117.
Suppose
the supply for product A is perfectly elastic. If the demand for this product
increases: A. the equilibrium price and quantity will increase; B. the
equilibrium price and quantity will decrease; C. the equilibrium quantity will
increase but the price will not change; D. the equilibrium price will increase
but the quantity will not change. ANS C
118.
If the coefficient of income elasticity of
demand is higher than 1 and the revenue
increases, the share of expenditures for commodity X in total expenditure: A.
will increase; B. will decrease; C. will remain constant; D. can not be
determined. ANS A
119.
If the demand for agricultural products is
inelastic: A. as the prices decrease, the revenues earned by producers
increase; B. as the prices decrease, the revenues earned by producers decrease;
C. rising prices do not lead to differentiation in producers' incomes; D. the
percentage decrease in prices is lower than the percentage increase in demand. ANS B
120.
For a rational consumer who has to choose
between two goods in the context of budget constraints, the price change of one
of the goods, caeteris paribus, will determine: A. a parallel shift of the
budget line to the left; B. a change in the slope of the budget line; C. no
change in the budget line; D. a parallel shift of budget line to the right. ANS B
121.
The price of the product A was reduced from
100 to 90 lei and, as a result, the quantity demanded has increased from 70 to
75 units. The demand is: A. inelastic; B. elastic; C. unit elastic; D. can not
be determined from the given information. ANS
A
122.
Choose the false statement: A. in general, the
demand for necessity goods is less elastic than demand for luxury goods; B. if
the price and the producers` income are directly proportional, the demand is
elastic; C. after a long period of time since the change in the price of the
good A, supply becomes more elastic; B. for a company whose production process
involves making two goods, one main and the other secondary, if the price of
the main good increases, - caeteris paribus - the supply on the secondary good`s
market will increase (and vice versa). ANS
B
123.
If the demand curve for product A moves to the
right, and the price of product B decreases, it can be concluded that: A. A and
B are substitute goods; B. A and B are complementary goods; C. A is an inferior
good, and B is a superior good; D. Both goods A and B are inferior. ANS B
124.
Suppose
the price of a good decreases by 10% and the quantity demanded for a certain
period of time increases by 15%. In these conditions: A. the revenues earned by
producers decrease; B. the revenues earned by producers increase; C. the
revenues are not influenced in any way; D. the company's expenses rise. ANS B
125.
If a price increase of 50% results in an
increase in the quantity supplyed of an economic good from 10 to 20 pieces, calculate
the coefficient of price elasticity of supply. A. ¼. B. ½; C 1 D 2 ANS D
126.
The
total utility coincides with the marginal utility: A. for the first unit
consumed; B. only for the irrational consumer; C. at the level of the last unit
consumed; D. at the saturation point. ANS
A
127.
The
indifference curve means: A. equal consumption of two goods; B. equal utility
from the consumption of two combinations of goods; C. equal consumer income; D.
equal prices of the goods consumed. ANS
B
128.
The points located at the intersection of the
budget line with the coordinate axes mean: A. the consumer does not spend all
his income; B. the consumer spends all his income for only one good; C. the
consumer spends absolutely nothing; D. these are points impossible to reach by
the consumer. ANS B
129.
An
economic agent contracts a loan of N15.000, which he will repay in three equal
annual installments. What will be the total interest paid, knowing that the
annual interest rate is 12% per year? A. N3.600; B. N1.800; C. N5.400; D. N1.500.
ANS A
130.
An
economic agent makes a bank deposit of N10.000 lei with an interest rate of 5%.
What will be the amount in the bank after 2 years, if the economic agent does
not make withdrawals from the account created during this period? A. N11.000;
B. N1.000; C. N11.025; D. N500. ANS C
131.
Which
of the following statements are false? A. information, the entrepreneur's
ability, technical progress are neo-factors of production; B. according to the
stages of the circular flow of the company's capital, it takes three forms:
money, capital goods and commodity; C. fixed capital depreciation is only due
to physical deterioration; D.the factors of production are resources attracted
and used in economic activity. ANS C
132.
Which
of the following aspects distinguish fixed capital from working capital: a. the
number of cycles of production they participate in; b. the location of the
production activity; c. the period of time after which they are replaced; d.
the way they transmit their value to the new product. A (a,d) B (c,d) C (a,c,d)
D (b,c,d) ANS C
133.
The
following data is given for a company: material costs 89 mil; working capital
45 mil; indirect salaries 10 mil; fixed costs 90 mil.; variable costs 52 mil.
Calculate fixed material costs and depreciation: A. 60 and 64; B. 70 and 56; C.
80 and 44; D. 89 and 45. ANS C
134.
Fixed
cost includes: a. expenditures for the salaries of the administrative staff; b.
expenditure for depreciation of fixed capital; c. energy costs for
manufacturing; d. expenditure for general lighting. A. (a,b,c) B. (a,b,d) C.
(a,c,d) D. (b,c,d) 19.When production volume is zero: a. the fixed cost is 0;
b. the variable cost is 0; c. the fixed cost is higher than the variable cost;
d. the variable cost is higher than the fixed cost. A (a,b,c) B (b,c,d) C (b,c)
D (a,d) ANS B
135.
Calculate
the average fixed cost (AFC), for a level of production Q = 20, knowing that
the total cost function is: TC = 200 + 3Q + 2Q2 . A. 1060; B. 200; C. 20; D.
10. ANS D
136.
Which
of the following statements is false: A. perfect competition involves many
sellers of standardized products; B. monopolistic competition involves many
sellers of homogeneous products; C. the oligopoly involves several producers of
standardized or differentiated products; D. monopoly involves a single product
for which there are no close substitutes. ANS
B
137.
On
the market with perfect competition: A. the firm is a "price-taker,"
meaning, it takes over the market price; B. the firm is a
"price-maker", meaning, it determines the market price; C. the
companies’ products are differentiated; D. input barriers are minimal, and exit
barriers are maximal. ANS A
138.
Which of the following conditions indicate
that a good is produced under perfect competition: A. producers` profits are
high; B. producers` profits are small; C. total supply is inelastic; D.
individual demand is perfectly elastic. ANS
D
139.
The profit maximization condition for a firm
in a market with monopolistic competition is the following (MR is marginal
revenue, MC is marginal cost, P is price, ATC is average total cost, TR is
total revenue): A. MR = MC; B. MC = P; C. MR = ATC; D. TR to be maximum. ANS A
140.
Which of the following statements about
monopoly is true: A. there are several companies producing a specific product;
B. there is only one producing company, but the product has close substitutes; C.
there are no competitors on the relevant market; D. input barriers are low. ANS C
141.
There
are differences between monopolistic and perfect competition regarding: A.
market entry; B. the number of sellers and buyers; C. the market power of
competitors; D. homogeneity of products. ANS
D
142.
Which
of the following can be considered as the basic features of public goods: A.
are state-owned; B. are characterized by non-excludability and non-rivalry; C.
are characterized by excludability and rivalry; D. may be positive or negative.
ANS B
143.
Which
of the following solutions are not part of the ways of internalizing
externalities: A. the imposition of fines on the producer of negative
externalities; B. the introduction of taxes and duties that bring private costs
to the level of social costs; C. closure of companies producing positive or
negative externalities; D. the association of the negative externality
manufacturer with the receptor of such an effect. ANS C
144.
Normally,
the natural economy is characterized by: A. price formation through complex
mechanisms; B. perfect competition; C. the preponderance of product exchange;
D. the satisfaction of the individual and community needs of its own
production. ANS D
145.
Which of the following features define human
needs: A. are not concurrent; B. do not disappear momentarily if they are
satisfied; C. are unlimited in capacity; D. are unlimited in number. ANS D
146.
Real GDP is nominal GDP adjusted for: A)
double counting. B) changes in prices. C) population. D) imports. ANS B
147.
What do a rubbernecking traffic jam and the
paradox of thrift have in common? A) In both cases, individual behavior has
large negative consequences for the whole of society. B) In both cases,
seemingly bad behavior ends up harming everyone. C) In both cases, seemingly
careless behavior leads to good times for all. D) In both cases, government
intervention can only make matters worse. ANS
A
148.
Every year more and more purchases are made
with credit cards on the Internet. Given this trend, all else equal, we would
expect: A) the money demand curve to shift outward. B) the money demand curve
to shift inward. C) a downward movement along a fixed money demand curve. D) an
upward movement along a fixed money demand curve. ANS B
149.
The
course packet and the class lecture contrasted _______________ historical
growth in real GDP per capita in the US compared to Argentina to
________________. A) slower; Argentina does not have such severely cold winter
weather B) faster; Argentina has a tropical climate with poor soil and tropical
diseases C) slower; Argentina encouraged land ownership by new immigrants but
the US “robber barons” owned all the land in the US D) faster; the US
encouraged land ownership by new immigrants but in Argentina Spanish colonists
had large land holdings ANS D
150.
Sam, who is 55 years old and has been a
steelworker for 30 years, is unemployed because the steel plant in his town
closed and moved to Mexico. Sam is experiencing: A) cyclical unemployment. B)
permanent unemployment. C) frictional unemployment. D) structural unemployment.
ANS D
151.
Planned
investment spending is: A) actual investment in a period. B) investment
spending minus depreciation in a period. C) investment spending that businesses
plan to undertake during a period. D) always equal to saving. ANS C
152.
The
marginal propensity to consume is: A) increasing if the marginal propensity to
save is increasing. B) the proportion of total disposable income that the
average family consumes. C) the change in consumer spending divided by the
change in aggregate disposable income. D) the change in consumer spending minus
the change in aggregate disposable income. ANS
C
153.
As a result of a decrease in the value of the
dollar in relation to other currencies, American imports decrease and exports
increase. Consequently, there is a(n): A) increase in short-run aggregate
supply. B) decrease in the quantity of aggregate output supplied in the short
run. C) increase in aggregate demand. D) decrease in the quantity of aggregate
output demanded. ANS C
154.
The
money demand curve is: A) downward-sloping because the opportunity cost of
holding money is inversely related to the interest rate. B) downward-sloping
because the opportunity cost of holding money rises as the interest rate rises.
C) downward-sloping because the opportunity cost of holding money rises as the
interest rate falls. D) upward-sloping because the opportunity cost of holding
money rises with the interest rate. ANS
B
155.
If
technology advances, then: A) more output can be obtained from the same inputs.
B) more inputs are needed to produce the same output. C) less output can be
obtained from the same inputs. D) less output can be produced even with more
inputs. ANS A
156.
A
course packet reading discussed in class attributed the slower adoption of
smart cards for transactions in the US compared to rapid adoption in Europe to:
A) Telephone calls were much more expensive in Europe in the 1980s B) Telephone
calls were much less expensive in Europe in the 1980s C) Europeans have adopted
new inventions of the electronic age faster than Americans D) Europeans have
adopted new inventions of the electronic age slower than Americans ANS A
157.
Long-run
economic growth has been mostly dependent on: A) rising productivity. B) a low
unemployment rate. C) an increase in the population which eventually leads to
an increase in the labor population. D) countries following the rule of 70. ANS A
158.
Rising inventories usually indicate: A) an
economy that grows unexpectedly. B) an economy that slows unexpectedly. C) an
unexpected spurt in sales. D) an inflationary cycle. ANS B
159.
Banks create money when they: A) make loans.
B) take deposits. C) hold excess reserves. D) pay withdrawals to depositors. ANS A
160.
An example of the frictionally unemployed is
a(n): A) autoworker who is temporarily laid off because of a decline in sales.
B) geologist who is permanently laid off from an oil company due to a new
technological advance. C) worker at a fast-food restaurant who quits work and
attends college. D) real estate agent who leaves a job in Texas and searches
for a similar, higherpaying job in California. ANS D
161.
An
example of a government transfer is a(n): A) expenditure on an interstate
highway. B) bequest from a deceased relative. C) Social Security payment. D)
salary for a member of the armed forces. ANS
C
162.
When
an economy's overall production grows faster than its population, it is
referred to as: A) long-run growth per capita. B) an increase in nominal GDP.
C) deflation. D) the paradox of thrift. ANS
A
163.
Deviations from the natural rate of
unemployment are known as: A) frictional unemployment. B) structural
unemployment. C) random unemployment. D) cyclical unemployment. ANS D
164.
Anticipated
inflation affects: A) borrowers only. B) lenders only. C) all aspects of the
economy. D) only business firms involved in investment spending. ANS C
165.
Changes
in aggregate demand can be caused by changes in: A) wages. B) business costs.
C) raw materials costs. D) government spending. ANS D
166.
Which
of the following do economists view as investment spending? A) stocks B) bonds
C) spending on physical capital D) mutual fund investing ANS C
167.
Suppose
that the economy is in long-run macroeconomic equilibrium and aggregate demand
increases. As the economy moves to short-run macroeconomic equilibrium, there
is: A) a recessionary gap with high inflation. B) a recessionary gap with low
inflation. C) an inflationary gap with high unemployment. D) an inflationary
gap with low unemployment. ANS D
168.
Which of the following does NOT cause the
money demand curve to shift? A) a change in the interest rate B) a change in
the price level C) a change in banking technology D) a change in real GDP ANS A
169.
People
forgo interest and hold money: A) because they are required to. B) to reduce
their transactions costs. C) because there are no substitutes for money. D)
because banks are too risky.ANS B
170.
A
business will want to borrow to undertake an investment project when the rate
of return on that project is: A) lower than the interest rate. B) higher than
the interest rate. C) higher than the exchange rate. D) equal to the inflation
rate. ANS B
171.
The trough of the business cycle: A) comes
right after the expansion phase. B) comes before the recession phase. C) is a
temporary maximum level of real GDP. D) is a temporary minimum level of real
GDP. ANS D
172.
The
short-run aggregate supply curve slopes upward because of: A) wage and price
stickiness. B) wage and price flexibility. C) increasing technology. D) a
reduction in resource availability at higher price levels. ANS A
173.
In a
simple closed economy, all investment spending must come from: A) saving. B)
money creation. C) debt issuance. D) foreign borrowing. ANS A
174.
Changing the level of government spending is
an example of: A) fiscal policy. B) interest rate policy. C) monetary policy.
D) exchange rate policy. ANS A
175.
Alice's disposable income increases by $1,000,
and she spends $600 of it. Alice's: A) MPS is 0.4 and she saves $400. B) MPC is
0.4 and she saves $400. C) MPS is 0.4 and she saves $600. D) MPC is 0.6 and she
consumes $400. ANS A
176.
If a country sold more goods and services to
the rest of the world than it purchased from the other countries, then the
country has a: A) trade deficit. B) budget deficit. C) trade surplus. D) budget
surplus. ANS C
177.
Suppose the marginal propensity to consume
changes from 0.75 to 0.9. How will this affect the consumption function? A) The
slope will get steeper. B) Autonomous consumption will increase. C) The
function will shift upward. D) The slope will get steeper and autonomous
consumption will increase. ANS A
178.
The
market value of all final goods and services produced within domestic territory
of the country during a year is known as------------- a. GDP @ MP b. GDP @ FC
c. GNP @ MP d. GNP @ FC ANS A
179.
The
money value of all final goods and services produced in the domestic territory
of a country during a year plus Net factor income from abroad is
called------------ a. GDP @ MP b. GDP @ FC c. GNP @ MP d. GNP @ FC ANS C
180.
The
difference between the income received from abroad for rendering factor
services by the normal residents of the country to the rest of the world and
income paid for the factor services rendered by nonresidents in the domestic
territory of a country is known as------- a. Net Factor Income from Abroad b.
Capital Consumption Allowances c. Depreciation d. None of these. ANS A
181.
The
difference between indirect tax and subsidy is known as------------- a. Net
Factor Income from Abroad b. Capital Consumption Allowances c. Depreciation d.
Net Indirect Tax. ANS D
182.
Net National Product at Factor Cost (NNPFC) is
also known as------------ a. Net Factor Income from Abroad b. National Income
c. National cost d. Net Indirect Tax. ANS
B
183.
That part of personal income which is actually
available to households for consumption and saving is called----------- a.
National Disposable Income b. Personal Disposable Income c. Personal Income d.
None. ANS B
184.
Real
and nominal income is calculated respectively at------------- a. Current price
and Constant Price b. Constant price and Current price c. Current price and
Current price d. Constant price and Constant price. ANS B
185.
GDP
Deflator is equal to----------- 𝑎. 𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃/ 𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 × 100 b. 𝑅𝑒𝑎𝑙 𝐺𝐷𝑃 /𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 × 100 c. 𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝐺𝑁𝑃/ 𝑅𝑒𝑎𝑙 𝐺𝑁𝑃 × 100 d. 𝑁𝑜𝑚𝑖𝑛𝑎𝑙 𝑁𝐷𝑃 /𝑅𝑒𝑎𝑙 𝑁𝐷𝑃 × 100 ANS A
186.
Sum
of all kinds of income received by the individuals from all sources is
called--------- a. Personal Income b. Private Income c. Personal Disposable
Income d. None ANS A
187.
GNPMP
is equal to a. GDPMP + NFIA b. GDPMP - NFIA c. GDPMP – D d. None ANS A
188.
A
situation when a person is able and willing to take up a job and gets employed,
it is called a. Employment b. Full Employment c. Under Employment d.
Unemployment. ANS A
189.
A situation when people are engaged in jobs
but they do not get these jobs according to their capabilities, efficiency and
qualifications, it is called a. Employment b. Full Employment c. Under
Employment d. Unemployment. ANS C
190.
A
situation when the workers are willing to work under any conditions and at any
wage rate but they fail to get employment, it is called a. Voluntary
Unemployment b. Involuntary Unemployment c. Cyclical Unemployment d. Frictional
Unemployment ANS B
191.
A temporary unemployment which exists during
the period of the transfer of labor from one occupation to another is called a.
Voluntary Unemployment b. Involuntary Unemployment c. Cyclical Unemployment d.
Frictional Unemployment ANS D
192.
When more workers are engaged in a work than
actually required to work, it is called a. Voluntary Unemployment b.
Involuntary Unemployment c. Disguised Unemployment d. Frictional Unemployment ANS C
193.
Who
developed the Classical Theory of Income and Employment? a. J. B. Say b. J. S.
Mill c. Ricardo d. All of the above. ANS
D
194.
“The
supply creates its own demand”. This is the famous law of---- a. Market (Say’s
Law of Market) b. Demand c. Supply d. None of the above. ANS A
195.
The book General Theory of Employment,
Interest and Money was written by---- a. J. N. Keynes b. J. M. Keynes c.
Ricardo d. None of the above. ANS B
196.
Keynesian
theory of employment is based on the concept of------------ a. Aggregate Demand
b. Aggregate Supply c. Aggregate Demand and Supply both d. None. ANS C
197.
The
investment which is undertaken independently of the level of income is known
as---- a. Autonomous Investment b. Induced Investment c. Public Investment d.
Private Investment ANS A
198.
The
components of aggregate demand is/ are------ a. Household consumption
expenditure b. Govt final conspt. expenditure c. Pvt and public invt
expenditure d. All ANS D
199.
Determination
equilibrium of an economy can be studied by----- a. Equality of AD and AS b.
Equality of saving and investment c. Both a and b d. None. ANS C
200.
Given
the consumption function C = $100 billion + 0.75 ($300 billion), autonomous
consumption is equal to: a. $100 billion. b. $225 billion. c. $300 billion. d.
$325 billion. e. $400 billion. ANS A
201.
Who is
considered as father of modern macroeconomics? a. Adam Smith b. Prof. J.
M. Keynes c. Prof. J. N. Keynes d. Alfred Marshall ANS B
202.
Who wrote the book “General Theory
of Employment, Interest and Money”? a. Adam Smith b. Prof. J. M. Keynes c.
Prof. J. N. Keynes d. Alfred Marshall ANS
B
203.
The term microeconomics and macroeconomics
were first given by ----------- a. Adam Smith b. Prof. J. M. Keynes c. Ragner Frisch d. Alfred Marshall ANS C
204.
The book “General Theory
of Employment, Interest and Money” was published in---------- a. 1836 b. 1936 c. 1963 d. None of these ANS B
205.
Macroeconomics became popular after------------- a. Great depression of 1929- 33 b.
1972-73 c. 1996- 97 d. 2006- 07 ANS A
206.
The term ‘macro’ has been derived
from-------------- a.
Greek word ‘makros’ which means large b. English word ‘makros’
which means large c. Greek word ‘makros’ which means small d.
French word ‘makros’ which means large ANS A
207.
In
macroeconomics, we study about ------------------ a. Theory of National Income &
Employment b. Theory of Money Supply & Price Level c. Theory of
International Trade & Eco growth d. All of the above. ANS D
208.
Which of the following is/are the goals of
macroeconomics----------- a.
To Achieve Higher Level of GDP b. To Achieve Higher Level of Employment c.
Stability of Prices d. All of the above. ANS
D
209.
What are the tools of macroeconomics? a. Monetary Policy b. Fiscal
Policy c. Income Policy d. All of the above. ANS D
210.
The study of groups and broad aggregates of
the economy is known as----------- a. Microeconomics b. Macroeconomics c. International
Economics d. None of the above. ANS B
211.
A situation when a
person is able and willing to take up a job and gets employed, it is called a. Employment
b. Full Employment c. Under Employment d. Unemployment. ANS A
212.
A situation when people
are engaged in jobs but they do not get these jobs according to their
capabilities, efficiency and qualifications, it is called a. Employment b. Full
Employment c. Under Employment d. Unemployment. ANS C
213.
A situation when the
workers are willing to work under any conditions and at any wage rate but they
fail to get employment, it is called a. Voluntary Unemployment b. Involuntary
Unemployment c. Cyclical Unemployment d. Frictional Unemployment ANS B
214.
A temporary unemployment
which exists during the period of the transfer of labor from one occupation to
another is called a. Voluntary Unemployment b. Involuntary Unemployment c.
Cyclical Unemployment d. Frictional Unemployment ANS D
215.
When more workers are
engaged in a work than actually required to work, it is called a. Voluntary
Unemployment b. Involuntary Unemployment c. Disguised Unemployment d.
Frictional Unemployment ANS C
216.
Who developed the
Classical Theory of Income and Employment? a. J. B. Say b. J. S. Mill c.
Ricardo d. All of the above. ANS D
217.
“The supply creates its own demand”. This is the famous law of---- a. Market (Say’s Law of Market) b. Demand c. Supply d.
None of the above. ANS A
218.
The book General
Theory of Employment, Interest and Money was written by---- a. J. N. Keynes
b. J. M. Keynes c. Ricardo d. None of the above. ANS B
219.
Keynesian theory of
employment is based on the concept of------------ a. Aggregate Demand b.
Aggregate Supply c. Aggregate Demand and Supply both d. None. ANS C
220.
The investment which is
undertaken independently of the level of income is known as---- a. Autonomous
Investment b. Induced Investment c. Public Investment d. Private Investment ANS A
221.
The components of
aggregate demand is/ are------ a. Household consumption expenditure b. Govt
final conspt. Expenditure c. Pvt and public invt expenditure d. All ANS D
222.
Determination equilibrium of an economy can be
studied by----- a. Equality of AD and AS b. Equality of saving and investment c.
Both a and b d. None. ANS C
223.
The French economist
Jean-Baptiste Say transformed the equality of total output and total spending
into a law that can be expressed as follows: a. Unemployment is not possible in
the short run. b. Demand and supply are never equal. c. Supply creates its own
demand. d. Demand creates its own supply. ANS
C
224.
The classical economists
argued that the production of goods and services (supply) generates an equal
amount of total income and, in turn, total spending. This theory is called: a.
Keynes' General Theory. b. Say's Law. c. The "animal spirits" theory.
d. The law of autonomous consumption.
ANS B
225.
Which of the following
statements is true about Say's law? a. It states that supply creates its own
demand. b. It states that demand creates its own supply. c. It states that total
output will always exceed total spending. d. It states that consumption spending
is the most volatile component of aggregate expenditures. e. It is a major
proposition of the Keynesian model. ANS
A
226.
The school of thought
that emphasizes the natural tendency for an economy to move toward equilibrium
full employment without inflation is known as the: a. Keynesian school. b.
Supply- side school. c. Non-interventionist school. d. Rational expectations
school. e. Classical school. ANS E
227.
According to Keynes, what is the most
important determinant of households' spending on goods and services? a. The
price level. b. The interest rate. c. Autonomous consumption. d. Disposable
income. ANS D
228.
The consumption function shows the
relationship between consumer expenditures and: a. The interest rate. b. The
tax rate. c. Savings. d. Disposable income. ANS D
229.
The relationship between consumer
expenditures and disposable income is the: a. Savings function. b. The tax rate
function. c. Disposable income function. d. Consumption function. ANS D
230.
Which of the following
statements is true concerning the consumption function? a. It slopes upward. b.
Its slope equals the MPC. c. It represents the direct (positive) relationship
between consumption spending and the level of real disposable income. d. If the
consumption function lies above the 45-degree line then saving is positive. e.
All of the above. ANS E
231.
The consumption function shows the
relationship between consumption and: a. Interest rates. b. Saving. c. Price
level changes. d. Disposable income. ANS
D
232.
At the point where the
disposable income line intersects the consumption function, saving: a. equals
consumption. b. equals disposable income. c. is less than zero. d. is equal to
zero. ANS D
233.
Autonomous consumption is consumption that: a.
varies directly with disposable income. b. varies inversely with disposable
income. c. is independent of the level of disposable income. d. is constant at
first and then varies with disposable income. ANS C
234.
Autonomous consumption
is equal to the level of consumption associated with: a. unstable disposable
income. b. positive disposable income. c. zero disposable income. d. negative
disposable income. ANS C
235.
The relationship between consumer expenditures
and disposable income is the: a. Savings function. b. The tax rate function. c.
Disposable income function. d. Consumption function. ANS D
236.
Given the consumption
function C = $100 billion + 0.75 ($300 billion), autonomous consumption is
equal to: a. $100 billion. b. $225 billion. c. $300 billion. d. $325 billion. e.
$400 billion. ANS A
237.
That part of disposal
income not spent on consumption is defined as: a. transitory disposable income.
b. permanent disposable income. c. disposal income. d. autonomous consumption. e.
saving. ANS E
238.
If disposal income is
$400 billion, autonomous consumption is $60 billion, and MPC is 0.8, what is
the level of saving? a. $20 billion. b. $210 billion. c. $380 billion. d. $590
billion. e. $780 billion. ANS A
239.
The marginal propensity
to consume (MPC) is computed as the change in: a. consumption divided by the
change in savings. b. consumption divided by the change in disposable personal
income. c. consumption divided by the change in GDP. d. None of the above. ANS B
240.
The marginal propensity
to consume (MPC) is the slope of the: a. GDP curve. b. disposable income curve.
c. consumption function. d. autonomous consumption curve. ANS C
241.
The slope of the
consumption function is called the: a. autonomous consumption rate. b. marginal
consumption rate. c. average propensity to consume. d. marginal propensity to
consume. ANS D
242.
The change in consumption divided by a change
in disposable income is defined as: a. the marginal propensity to consume. b.
autonomous consumption. c. the consumption function. d. Keynes' absolute
disposable income hypothesis. e. transitory consumption. ANS A
243.
The marginal propensity
to consume is: a. the change in disposable income divided by the change in
consumption. b. consumption spending divided by disposable income. c.
disposable income divided by consumption spending. d. the change in consumption
divided by the change in disposable income. e. the change in consumption
divided by disposable income. ANS D
244.
The marginal propensity to consume measures
the ratio of the: a. average amount of our disposable income that we spend. b.
average amount of our savings that we spend. c. change in consumer spending to
a change in money holdings. d. change in consumer spending to a change in
interest rates. e. change in consumer spending to a change in disposable
income. ANS E
245.
The marginal propensity
to save (MPS) is computed as the change in: a. savings divided by the change in
saving. b. savings divided by the change in disposable personal income. c.
saving divided by the change in GDP. d. None of the above. ANS B
246.
If your disposable
personal income increases from $30,000 to $40,000 and your savings increases
from $2,000 to $4,000, your marginal propensity to save (MPS) is: a. 0.2. b.
0.4. c. 0.5. d. 0.8. e. 1.0. ANS A
247.
The marginal propensity
to save is: a. the change in saving induced by a change in consumption. b. (change
in S) / (change in Y). c. 1 - MPC / MPC. d. (change in Y - bY) / (change in Y).
e. 1 - MPC. ANS B
248.
If the marginal propensity to consume = 0.75,
then: a. the marginal propensity to save = 0.75. b. the marginal propensity to
save = 1.33. c. the marginal propensity to save = 0.20. d. the marginal
propensity to save = 0.25. e. since the marginal propensity to save and the
marginal propensity to consume are unrelated, we cannot determine the marginal
propensity to save from the information given. ANS D
249.
Who developed the concept of IS- LM model? a. Hicks and Hansenb. J. M.
Keynes c. Adam Smith d. None of the above. ANS A
250.
When rate of interest falls, level of investment will— a. increase b. decrease c. no effect on investment d.
both a & b ANS A
251.
The curve which shows different equilibrium levels of national income
with various rates of interest is called a.
LM curve, b. IS curve c. Income curve d. None of the above ANS B
252.
IS curve slopes— a. upward b. downward c. horizontal d.
vertical ANS B
253.
The steepness of IS curve depends on--- a. the elasticity of investment demand curve; b. the size of the
multiplier; c. demand for money d. both a & b ANS D
254.
The position of IS curve depends on--- a. rate of interest, b. rate of investment, c. autonomous expenditure d.
none of the above ANS C
255.
The curve which relates the level of income with the rate of interest
which is determined by money- market equilibrium corresponding to different
levels of demand for money is known as a.
IS curve b. LM curve c. Income curve d. None of the above. ANS B
256.
LM curve slopes— a. downward to the right b. upward to the
right c. vertical d. horizontal. ANS B
257.
The LM curve is flatter if the
interest elasticity of demand for money a.
high b. low c. both may be possible d. none of the above ANS A
258.
The LM curve shifts to the right when the stock of money is a. decreased b. increased c. constant d. none of the
above. ANS B
259.
Which of the following is the correct definition of the IS curve? a. The IS curve represents the single level of output
where financial markets are in equilibrium. b. The IS curve represents the
combinations of output and the interest rate where the money market is in
equilibrium. c. The IS curve represents the single level of output where the
goods market is in equilibrium. d. The IS curve represents the combinations of
output and the interest rate where the goods market is in equilibrium. ANS D
260.
Suppose the economy is operating on the LM curve but not on the IS curve.
Given this information, we know that: a.
the money market and bond markets are in equilibrium and the goods market is
not in equilibrium. b. the money, bond and goods markets are all in
equilibrium. c. neither the money, bond, nor goods markets are in equilibrium.
d. the goods market is in equilibrium and the money market is not in
equilibrium. ANS A
261.
Which of the following statements is consistent with a given (i.e.,
fixed) LM curve? a. A reduction in the
interest rate causes investment spending to increase. b. A reduction in the
interest rate causes money demand to decrease. c. An increase in output causes
an increase in demand for goods d. An increase in output causes an increase in
money demand. ANS D
262.
A reduction in government spending will cause: a. an upward shift in the LM curve. b. a leftward
shift in the IS curve. c. a downward shift in the LM curve. d. a rightward
shift in the IS curve. ANS B
263.
Suppose investment spending is NOT very sensitive to the interest rate.
Given this information, we know that: a.
the IS curve should be relatively steep. b. the IS curve should be relatively
flat. c. the LM curve should be relatively flat. d. the LM curve should be
relatively steep. ANS A
264.
An increase in the aggregate price level, P, will most likely have which
of the following effects? a. a rightward shift in
the IS curve. b. a leftward shift in the IS curve. c. an upward shift in the LM
curve. d. a downward shift in the LM curve ANS
C
265.
.Which of the following will occur if there is an increase in taxes? a.
The IS curve shifts and the economy moves along the LM curve. b. The LM curve
shifts and the economy moves along the IS curve. c. Output will change causing
a change in money demand and a shift of the LM curve. d. Neither the IS nor the
LM curve shifts. e. Both the IS and LM curves shift. ANS A
266.
Suppose the current level of output and the interest rate are such that
the economy is operating on neither the IS nor LM curve. Which of the following
is true for this economy? a. Production does not
equal demand. b. The quantity supplied of bonds does not equal the quantity
demanded of bonds. c. The money supply does not equal money demand. d.
Financial markets are not in equilibrium. e. all of the above. ANS E
267.
Suppose the economy is currently operating on both the LM curve and the
IS curve. Which of the following is true for this economy? a. Financial markets are in equilibrium. b. The
quantity supplied of bonds equals the quantity demanded of bonds. c. Production
equals demand. d. The money supply equals money demand. e. all of the above. ANS E
268.
The IS curve will NOT shift when which of the following occurs? a. a reduction in government spending. b. a reduction
in consumer confidence. c. a reduction in the interest rate. d. all of the
above. e. none of the above. ANS C
269.
Based on our understanding of the IS-LM model that takes into account
dynamics, we know that a reduction in the money supply will cause: a. a gradual increase in r and gradual reduction in Y.
b. an immediate increase in r and no initial change in Y. c. an immediate drop
in Y and immediate increase in r. d. none of the above. ANS B
270.
Which of the following best defines the LM curve? a. illustrates the effects of changes in r on desired
money holdings by individuals. b. illustrates the effects of changes in r on
investment. c. the combinations of r and Y that maintain equilibrium in the
goods market. d. the combinations of r and Y that maintain equilibrium in
financial markets. ANS D
271.
A reduction in consumer confidence
will likely have which of the following effects? a. a rightward shift in the IS curve. b. a leftward shift in the IS
curve. c. an upward shift in the LM curve. d. a downward shift in the LM curve.
ANS B
272.
For this question, assume that investment spending depends only on output
and no longer depends on the interest rate. Given this information, an increase
in the money supply: a. will cause investment
to increase. b. will cause an increase in output and have no effect on the
interest rate. c. will cause a reduction in the interest rate. d. will cause
investment to decrease. e. will have no effect on output or the interest rate. ANS C
273.
Which of the following statements is consistent with a given (i.e.,
fixed) IS curve? a. An increase in
government spending causes an increase in demand for goods. b. A reduction in
the interest rate causes investment spending to increase. c. A reduction in the
interest rate causes money demand to decrease. d. A reduction in the interest
rate causes an increase in the money supply. e. An increase in taxes causes a
reduction in demand for goods. ANS B
274.
Which of the following best
defines the IS curve? a. the combinations of i
and Y that maintain equilibrium in the goods market. b. illustrates the effects
of changes in i on investment. c. the combinations of i and Y that maintain
equilibrium in financial markets. d. illustrates the effects of changes in i on
desired money holdings by individuals. ANS
A
275.
Which of the following is the definition for the real supply of money? a. the stock of money measured in terms of goods, not
dollars. b. the stock of high powered money only. c. the actual quantity of
money, rather than the officially reported quantity. d. the ratio of the real
GDP to the nominal money supply. e. the real value of currency in circulation
only. ANS A
276.
Which of the following is true for a given point on the LM curve? a. The goods market is in equilibrium. b. Production
is equal to demand. c. No inventory investment equals zero. d. all of the
above. e. none of the above. ANS E
277.
Based on our understanding of the IS-LM model that takes into account
dynamics, we know that a reduction in government spending will cause: a. a gradual reduction in r and an immediate reduction
in Y. b. an immediate reduction in r and no initial change in Y. c. an
immediate drop in Y and immediate increase in r. d. a gradual reduction in r
and gradual reduction in Y. ANS D
278.
Assume that investment does NOT depend on the interest rate. A reduction
in the money supply will cause which of the following for this economy? a. an increase in investment. b. no change in the
interest rate. c. no change in output. d. a reduction in investment. ANS C
279.
The change in investment due to
change in income is known as- A. Consumption; B. Multiplier; C. Accelerator; D.
IS curve ANS B
280.
In trade/ business cycle, the cycles
follow these sequence- A. Prosperity or boom → recession → depression or slump
and then → Recovery; B. Prosperity or boom → depression or slump → recession
and then → Recovery. C. Recession → depression or slump → Recovery and then →
Prosperity or boom D. Recovery → recession → depression or slump and then →
Prosperity or boom. ANS A
281.
If the marginal
propensity to save is 0.2 then the multiplier will be- A. 2.5; B. 5.0; C. 0.2;
D. None of the above ANS B
282.
If the marginal propensity to
consume is 0.8 (80 %) then the multiplier will be- A. 2.5; B. 5.0; C. 0.2; D.
None of the above ANS B
283.
The rate of discount (r) which
equalizes the present value of the prospective yield of an asset with its
supply price is known as- A. Prospective income B. Supply price C. Prospective
yield D. Marginal Efficiency of Capital (MEC). ANS D
284.
With increase in investment, MECA.
Increases; B. Decreases; C. Constant; D. All of the above ANS B
285.
The change in income due to change
in investment is known as- A. Consumption; B. Multiplier; C. Accelerator; D. IS
curve ANS B
286.
Higher the value of MPC, A. Lower
will be the value of multiplier; B. Higher will be the value of multiplier; C.
No effect will be on multiplier; D. All is possible. ANS B
287.
Higher the value of MPS, A. Lower
will be the value of multiplier; B. Higher will be the value of multiplier; C.
No effect will be on multiplier; D. All is possible ANS A
COMPILED BY MONDAY DESMOND
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