Macroeconomics Theories And Policies II Set 3
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This set of Macroeconomics, Theories and Policies 2 Multiple Choice Questions & Answers (MCQs) focuses on Macroeconomics Theories And Policies II Set 3
Q1 | According to Classical what bring full employment in an economy?
- flexible wage and rigid price
- a rigid wage and flexible price
- wage price flexibility
- wage price rigidity
Q2 | What is the effect of monetary policy in a situation of “Liquidity trap”?
- expansionary monetary policy
- contractionary monetary policy
- both expansionary and contractionary monetary policy effective
- monetary policy ineffective
Q3 | In which of the following market Keynes effect operates?
- goods market
- labour market
- money market
- all of the above markets
Q4 | In which of the following market Pigou effect operates?
- goods market
- labour market
- money market
- all of the above markets
Q5 | Real balance effect is equal to –
- pigou effect divided by keynes effect
- pigou effect into keynes effect
- pigou effect + keynes effect
- pigou effect - keynes effect
Q6 | Under perfect competition firm hire labour until-
- money wage rate > general price level
- money wage rate < general price level
- money wage rate = general price level
- both a and c
Q7 | Classical dichotomy is based on –
- neutrality of money
- velocity of money
- medium of exchange of money
- both a and b
Q8 | Cambridge K is related to –
- restatement theory of money
- cash balance approach
- liquidity preference theory
- transaction version of quantity theory of money
Q9 | Assertion (A) : In liquidity trap, the demand for money is perfectly interest elastic. Reason (R) : Because in this situation, all the investors expect the market rate of interest to risetowards the natural rate of interest. Codes :
- (a) & (r) both are correct and (r) is the correct explanation of (a)
- (a) & (r) both are correct, but (r) is not the correct explanation of (a)
- (a) is correct, but (r) is incorrect.
- both (a) and (r) are incorrect.
Q10 | Which of the following is not specifically mentioned as a determinant of the demand formoney ?
- wealth
- nominal yield on alternative assets
- inflation rate
- real rate of interest
Q11 | In the Keynesian system speculative demand for money arises because of, 1 : uncertainty of future interest rate. 2 : unexpected expenditures. 3 : To bridge the gap between income and eventual expenditures.4 : Relationship between changes in the interest rates and bond price. Codes :
- 1 & 3 are correct
- 1 & 4 are correct
- 2 & 3 are correct
- 3 & 4 are correct
Q12 | The classical economists focused on the role of money as,
- medium of exchange
- medium of distribution
- wealth
- link between present and future
Q13 | Identify the correct chronological order of the following classical economists.
- adam smith, malthus, ricardo, mill
- adam smith, ricardo, malthus, mill
- adam smith, mill, ricardo, malthus
- adam smith, malthus, mill, ricardo
Q14 | Liquidity trap is a situation when,
- all potential investors expect the rate of interest to rise in future.
- all potential investors expect the rate of interest to fall in future.
- natural rate of interest is above the critical rate of interest.
- none of these
Q15 | Which of the following statements does not hold true in case of the Keynesian economics?
- velocity of money is an unstable function of its determinant
- labor is subject to money illusion
- as function tends to become flat at levels of output well below full employment and to become steeper ad full capacity is reached
- as schedule is vertical, and output, and employment are completely supply determined.
Q16 | In whose economic theories, Malthus theories are in the base?
- adam smith
- ricardo
- keynes
- robin’s
Q17 | The equation of exchange is
- m*p=v*y
- m+v=p+y
- m+y=v+p
- m*v=p*t
Q18 | The formula to compute the spending multiplier is
- 1/(mpc+mps)
- 1/(1-mpc)
- 1/(1-mps)
- 1/(c+i)
Q19 | Liquidity trap sets a loop:
- below which the discount rate cannot fall
- above which discount rate cannot rise
- below which the market rate of interest cannot fall
- above which market rate of interest cannot rise
Q20 | If the Keynesian consumption function is C=10+0.8Yd then, if disposable income is 1000,what is amount of total consumption ?
- 0.8
- 800
- 810
- 0.81
Q21 | Why does a temporary decrease in government purchases decrease labour supply in theclassical model?
- people prefer to work less when government is doing less for them.
- decreased government purchases make people worse off, so they work less hours.
- the decrease in current or future taxes needed to pay for the decrease in government purchases increases people wealth
- the fall in government spending decreases labour demand, decreasing the real wage, and sopeople decreases their labour supply.
Q22 | As the economy nears full employment the aggregate supply curve tend to
- become flatter
- become sleeper
- shift to the left
- shift to the right
Q23 | “In a closed economy with no government; s=100+0.2y investment increases by 100, what isthe increase in consumption?
- 100
- 200
- 300
- 400
Q24 | Using Keynesian multiplier, MPC= 0.8 and government spending increased by 40 billiondollars. How much will GDP increased?
- 100 billion dollars
- 200 billion dollars
- 300 billion dollars
- 500 billion dollars
Q25 | According to Keynesian analysis, the great depression was caused by:
- a lack of spending
- a sharp rise in the mpc
- too much investment
- too much foreign influence on the economy