Solved MCQs of Macroeconomics pdf | Theory of Income, Employment, Inflation

Solved MCQs of Macroeconomics pdf Theory of Income, Employment, Inflation
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Solved MCQs of Macroeconomics pdf | Theory of Income, Employment, Inflation

1. Lower unemployment and lower inflation rates can best be achieved with a

(a) rightward shift of the Phillips curve

(b) rightward shift of the aggregate demand curve

(c) rightward shift of the aggregate supply curve

(d) leftward shift of the aggregate supply curve

Ans. c

2. Which of the following causes a decrease in unemployment and inflation at the same time?

(a) A rightward shift in the aggregate supply curve

(b) Wage increases equal productivity increases which reduces intlation

(c) A rightward shift in the aggregate demand curve

(d) All of the above

Ans. a

3. The Keynesian analysis of aggregate demand indicates that a decline in the price level causes

(a) a decline in the real money supply, an increase in interest rates, a decline in investment spending and a decline in aggregate output demanded

(b) a decline in the real money supply, a decline in interest rates, an increase in investment spending and an increase in aggregate output demanded

(c) an increase in the real money supply, a decline in interest rates, an increase in investment

(d) a decline in spending and an increase in aggregate output demanded

Ans. 

4. The aggregate supply curve is

(a) the total quantity of raw materials offered for sale at different prices

(b) the total quantity of final goods and services offered for sale at the current price level

(c) the total quantity of final goods and services offered for sale at different price levels

(d) the total quantity of intermediate and final goods and services offered for sale at different price levels

Ans. c

5. Which of the following will cause the Phillips curve to shift to the left?

(a) Eliminating price controls

(b) Regulating the economy

(c) Increasing the marginal tax rate on excess profit

(d) Job-search assistance

Ans. d

6. Keynesians contend that

(a) the self-correcting mechanism works slowly because wages are inflexible

(b) the aggregate supply curve does not move quickly to restore the economy to the natural rate of unemployment

(c) there is little need for active government policy to restore the economy to full employment when unemployment

(d) Both ‘a and ‘b’

Ans. d

7. A movement along the Phillips curve shows that the unemployment rate and inflation rate are

(a) inversely related to each other

(b) directly related to each other

(c) changing in response to shifts in aggregate supply

(d) changing in response to supply side policy

Ans. a

8. The total quantity of an economy’s final goods and services demanded at different price levels is

(a) the aggregate supply curve

(b) the aggregate demand curve

(c) the Phillips curve

(d) the aggregate expenditure function

Ans. b

9. Deficient demand causes

(a) deflation

(b) excess defiationary gap

(c) infiationary gap

(d) deflationary gap

Ans. d

10. According to monetarists, a decline in the money supply holding other factors constant shifts the aggregate……. curve to the …

(a) demand, right

(c) supply, right

(b) demand, left

(d) supply, left

Ans. b

11. According to James Tobin, which of the following is the benefit of inflation?

(a) Help to achieve economic efficiency

(b) Help to achieve lower rate of unemployment

(d) None of the above

(c) both a and b

Ans. c

12. Which of the following causes stagflation?

(a) Workers push costs upward and thereby initiate inflation

(b) Wage increases equal productivity increases, thereby setting off inflation

(c) A leftward shift in the aggregate démand curve

(d) A leftward shift in the aggregate supply curve

Ans. d

13. Higher unemployment and higher inflation rates will most likely occur with

(a) a rightward shift of the Phillips curve

(b) a rightward shift of the aggregate supply curve

(c) a rightward shift of the aggregate demand curve

(d) a leftward shift of the aggregate demand curve

Ans. a

14. According to the Keynesian view of aggregate demand,

(a) an increase in the money supply lowers interests rates and stimulates planned investment spending

(b) changes in government spending and taxes and net exports are important sources of shift in the aggregate demand curve

(c) changes in consumer’s perception of business aptimism can also shift the aggregate demand curve

(d) All of the above

Ans. d

15. According to the Keynesians, a decrease in net exports, keeping other things equal, shifts the aggregate…. curve . to the …

(a) demand, right

(b) demand, ieft

(d) supply. right ya Kiddns

(3)

Ans. b

16. The long-run aggregate supply curve is a vertical line passing through

(a) the natural rate of output

(b) the natural rate of price level

(c) the actual rate of unemployment

(d) the expected rate of inflation

Ans. a

17. Keynesians believe that

(a) the aggregate demand curve is downward sloping

(b) a change in the quantity of money causes the aggregate demand curve to shift

(c) changes in government spending and taxes do not cause the aggregate demand curve to shift

(d) Both ‘a’ and ‘b’

Ans. d

18. According to the Keynesian, an increase in net exports, keeping other things equal, shifts the aggregate curve to the …..

(a) demand, right

(b) demand, left

(c) supply, left

(d) supply,right

Ans. a

19. The aggregate demand curve decreases when

(a) government spending is decreased

(b) net exports decline

(c) taxes are increased

(d) All of the above

Ans. d

20. Which of the following policies relates to supply side level?

(a) Human capital investment

(b) Open-market operations

(c) Löwering the minimum reserve requiremernt

(d) Income transfers

Ans. a

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21. Phillips developed a curve which showed the trade of between

(a) the full employment and interest rates

(b) the unemployment and inflation rates

(c) the full employment rate and the natural rate of unemployment

(d) the natural rate of unempLoyment and exchange rates

Ans. b

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22. The rate of unemployment corresponding to a real wage which tends to clear off from the labour market is known as

(a) frictional rate of unemployment

(b) structural unemployment

(c) natural rate of unemployment

(d) None of the above

Ans. c

23. An aggregate supply curve that is always vertical is most consistent with which of the following view of the economy?

(a) Keynesian

(c) Supply side

(b) Monetarist

(d) Consensus

Ans. b

24. A leftward shift of the Phillips curve will cause

(a) an increase in both unemployment and infiation

(b) a decrease in both unemployment and infiation

(c) a trade off between unemployment and intiation

(d) an outcome known as stagflation

Ans. b

26. The aggregate demand curve is downward sloping because

(a) a lower price level leads to a larger quantity of money in real terms, causing the interest rate to rise, lowering the value of the rupee and raising net exports

(b) a lower price level leads to a larger quantity of money in real terms, causing the interest rate to fall, lowering the value of the rupee and raising net exports

(c) a higher price level leads to a smaller quantity of money in real terms, causing the interest rate to rise, lowering the value of the rupee and raising net exports

(d) a higher price level leads to a smaller quantity of money in real terms, causing the interest rate to rise, raising the value of the rupee and raising net exports of

Ans. b

27. Keynesians believe that the self-correcting mechanism

(a) returns the economy to the natural rate level of aggregate output relatively quickly

(b) is sufficiently quick to rule out the need for active government involvement to restore the economy to full employment

(c) takes a long time to restore the economy to the natural level of output

(d) never works

Ans. c

28. Which of the following is the best indication that stagflation is occurring?

(a) Rising unemployment rate, falling inflation rate

(b) Rising unemployment rate, rising inflation rate

(c) Falling unemployment rate, falling inflation rate

(d) Falling unemployment rate, rising inflation rate

Ans. b

29. Short-run Phillips curve shifts when

(a) actual inflation rate changes

(b) expected inflation rate changes

(c) Both ‘a’ and ‘b’

(d) None of the above

Ans. b

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30. Fall in general price level below the base year level is known as

(a) inflation

(b) disinflation

(c) detlation

(d) higher inflation

Ans. c

32. An attempt to lower unemployment with demand side policies will cause an increase in the price level which is illustrated by a rightward shift of the

(a) Phillips curve

(b) aggregate supply curve

(c) aggregate demand curve

(d) All of the above

Ans. c

33. Which of the following policy is related to the supply side level?

(a) Cutting the discount rate

(b) Increased government transfers

(c) Infrastructure development

(d) All of the above

Ans. c

34. Which of the following would be most likely to result stagflation?

(a) Worker training programmes

(b) Lower illiteracy rates

(c) Growth of human capital

(d) Increased government regulations on industry

Ans. d

35. Supply side of inflation refers to

(a) wage induced inflation

(c) suppressed inflation

(b) comprehensive intlation

(d) cost push infiation

Ans. d

36. Which of the following would lead to stagflation?

(a) Increased productivity, which throws workers out of jobs

(b) War

(c) Greater structural unemployment

(d) Government deregulation, which forces firms to compete with each other

Ans. c

37. A movement down the Phillips curve will cause

(a) an increase in botn unemployment and inflation

(b) a decrease in both unemployment and infiation

(c) a trade atf between unemplayment and inflation

(d) an outcome known as stagflation

Ans. c

38. According to classical theory, the main cause of inflation

(a) increase in money supply

(b) decrease in maney supply

(c) increase in aggregate demand

(d) Nane of the above

Ans. a

39. Which of the following is not a feature of the AW Phillip’s inflation unemployment trade off relation?

(a) A non-linear inverse relationship between unemployment rate and the rate of exchange in wage rate

(b) There is a loop in the anti clockwise around the Phillips curve

(c) The wage infiation unemployment relationship is predictable

(d) Philips curve shifts when expected rate of inflation shifts

Ans. d

40. The aggregate demand curve slopes downward because decrease in the price level means a/an…… in the real money supply and therefore a . level of real spending.

(a) increase, higher

(c) decrease, lower

(b) increase, lower

(d) decrease, higher

Ans. a

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41. Stagflation can result from

(a) expanisionary fiscal policy

(b) contractionary fiscal policy

(c) a rightward shift in the aggregate supply curve

(d) a leftward shift in the aggregate supply curve

Ans. d

42. An increase in the misery index would definitely result from

(a) a leftward shift of the Phillips curve

(b) a rightward shift of the Phillips curve

c) a movement along the Phillips curve toward greater unemployrment

(d) a movement along the Phillips curve toward greater inflation

Ans. b

43. According to the monetarists, an increase in the money supply, other things equal, shifts the aggregate . curve to the ……..

(a) demand, right

(c) supply, left

(b) demand, left

(d) supply, right

Ans. a

44. The idea that a shift in aggregate demand affects both inflation and unemployment is consistent with

(a) the Keynesian view of the economy

(b) the consensus view of the economy

(c) the monetarist view of the economy

(d) a vertical aggregate demand curve

Ans. b

45. The impact on the economy of a given shift in aggregate demand depends on the

(a) shape of the aggregate supply curve (L) response of consumers to a change in spending

(c) position of the aggregate supply curve

(d) All of the above

Ans. d

46. When current income includes negative transiton component, relating consumption with current income, then it will produce

(a) an average propensity to consume that is lower than the long-run average propensity to corisume

(b) an average propensity to consume that is higher than the fong-run average propensity to consume

(c) an average propensity consume that equals the long-run average propensity consume

(d) None of the above

Ans. b

47. The total quantity of final goods and services offered for sale at different price levels is

(a) the aggregate supply curve

(b) the aggregate demand curve

(c) the Phillips curve

(d) the 45 line

Ans. a

48. Which of the following will definitely cause the value of the misery index to increase?

(a) Greater stagflation

(b) A rightward shift of the aggregate supply curve

(c) A leftward shift of the Phillips curve

(d) All of the above

Ans. a

49. Which of the following is consistent with the general consensus about the shape of the short-run aggregate supply curve?

(a) Horizontal until full employment is reached and then vertical

(b) Horizontal, then upward sloping and ultimately vertical

(c) Horizontal at all production levels

(d) Vertical

Ans. b

50. Which of the following does not cause the aggregate demand curve to shift to the left?

(a) A decrease in net exports

(b) A decrease in government spending

(c) A decrease in taxes

(d) A decrease in the money supply

Ans. d

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51. The misery index

(a) was a term used by Max

(b) is the sum of inflation and economic growth

(c) refers to a period of declining real GDP

(d) is the sum of inflation and unemployment rates

Ans. d

52. Which of the following summarises the shape of aggregate supply curve?

(a) Keynesian views it as vertical up until full employment at which point it becomes horizontal

(b) Monetarist views it as horizontal

(c) The consensus view that it begins horizontal, then starts to slope upward to the right as the economy approaches full ermployment and eventually becomes vertical

(d) All of the above

Ans. c

53. The aggregate demand curve is

(a) the total quantity of an economy’s intermediate goods demanded at all price levels

(b) the total quantity of an economy’s intermediate goods demanded at a particular price level

(c) the total quantity of an economy’s final goods and services demanded at a particular price level

(d) the total quantity of an economy’s tinal goods and services demanded at different price levels

Ans. d

54. The relationship between inflation and unemployment in the long-run is

(a) strong

(c) very strong

(b) weak

(d) None of these

Ans. b

55. Which of the following would shift the Phillips curve to the left? 

(a) Contractionary monetary policy

(b) Contractionary fiscal policy

(c) An increase in import tariffs

(d) A decrease in the regulation of business

Ans. b

56. Friedman’s modern quantity theory of money concludes that changes in aggregate spending are primarily determined by changes in

(a) government spending and taxes

(b) the velocity of money

(c) interest rates

(d) the money supply

Ans. d

57. Phillips curve reveals that there is a trade off between

(a) rate of unemployment and rate of inflation

(b) unemployment and rate of defiation

(c) rate of unemployment and rate of change in money wage rate

(d) None of the above

Ans. a

58. Which of the following is not the fiscal measure to curb inflation?

(a) Credit control

(b) Increase in taxes

(c) Public debt

(d) Reducing in unnecessary expenditure

Ans. a

59. Keynesians believes that

(a) the aggregate demand curve is downward sloping

(b) a change in the quantity of money causes the aggregate demand curve to shift

(c) changes in government spending and taxes cause the aggregate demand curve to shift

(d) All of the above

Ans. d

60. Keynesians analyse aggregate demand in terms of its four components parts, i.e.

(a) consumer expenditures, planned investment spending. government spending and net exports

(b) consumer expenditures, actual investment spending, government spending and net exports

(c) consumer expenditures, planned investment spending, government spending and gross exports

(d) consumer expenditures, planned investment spending, government spending and taxes

Ans. a

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61. The trade off between unemployment and inflation is the result of an aggregate supply curve that is

(a) horizontal

(b) vertical

(C) upward sloping

(d) downward sloping

Ans. c

62. Which of the following will occur because of an rightward shift of the Phillips curve?

(a) A rightward shift of aggregate demand

(b) A decrease in both unemployment and inflation

(c) A trade off between unempioyment and inflation

(d) An outcome known as stagfiation

Ans. d

63. A leftward shift of the Phillips curve will cause

(a) an increase in both unemployment and inflation

(b) a decrease in both unemployment and inflation

(c) a trade off between unemployment and intiation

(d) an outcome known as stagtlation

Ans. b

64. If the aggregate supply curve is upward sloping, a decrease in aggregate demand will cause

(a) a decrease in the price level and an increase in unemployment

(b) a decrease in the price level and a decrease in unemployment

(c) an increase in the price level and an increase in unemployment

(d) an increase in the price level and a decrease in unemployment

Ans. a

65. Stagflation is the combination of

(a) high deflation and low unemployment

(b) high inflation and low unemployment

(c) high inflation and high unemployment

(d) None of the above

Ans. c

66. Which one is not the demand side cause of inflation?

(a) Increase in exports

(b) Deficit financing

(c) Black money

(d) Increase in disposable income

Ans. a

67. The Keynesian analysis of aggregate demand indicates that a change in taxes

(a) shifts the aggregate demand curve in the same direction as the change in government spending

(b) shifts the aggregate demand curve in the direction opposite to that of the change in government spending

(c) moves the economy along the aggregate demand curve rather than shifting it

(d) has no effect on aggregate demand

Ans. b

68. Long-run Phillips curve is

(a) horizontal straight line

(b) downward siocing streigh: lino

(c) Grical straight line

(d) upward sloping straight line

Ans. c

69. The aggregate demand curve is downward sloping because

(a) a lower price level, holding the nominal quantity of money constant, leads to a larger quantity of money in remains, causes the interest rale to fall and stimulates planned investment spending

(b) a lower price level leads to a larger quantity of money in real terms, causing the interest rate to fall lowering the value of the rupee, and raising net exports

(c) a higher price level, holding the nominal quantity of money constant, leads to a smaller quantity of money in real terms, causes the interest rate to fall and stimulates planned investment spending

(d) Both ‘a’ and ‘b’

Ans. d

70. Phillips curve relationship holds only for

(a) short-run

(c) Both ‘a’ and ‘b’

(b) long-run

(d) None of these

Ans. a

71. According to Cambridge school, the main cause of inflation is

(a) decrease in demand for money

(b) increase in demand for money

(c) increase in supply of money

(d) decrease in supply of money

Ans. b

72. When increase in aggregate demand is more than increase in aggregate supply, this imbalance causes

(a) cost push inflation

(C) open inflation

(b) markup inflation

(d) demand pull inflation

Ans. d

73. Which is not the cause of stagflation?

(a) Restricted supply of labour

(b) Decrease in indirect taxes

(c) Global increase in prices of goods

(d) increase in money supply

Ans. c

74. Which of the following is not the cause of inflation?

(a) Deficit financing

(b) Rise in indirect taxes

(c) Decrease in population

(d) Increase in minimum support price

Ans. c

75. If the inflation rate is negative, the price level in an economy is

(a) rising rapidly

(c) rising slowly

(b) falling

(d) constant

Ans. b

76. For a given Phillips curve

(a) expansionary monetary policy will shift the curve to the right

(b) contractionary fiscal policy will shift the curve to the left

(c) dernand side policies will cause a movement along the curve

(d) All of the above

Ans. c

77. Monetary and fiscal restraint will both result in a

(a) letward shift in aggregate demand

(b) movement down the Phillips curve towards a higher unemployment rate

(c) higher unemployment rate but a lower inflation rate

(d) All of the above

Ans. d

78. Stagflation is

(a) Stagnation + Deflation

(c) Stagnation + Inflation

(b) Deflation + Inflation

(d) None of these

Ans. c

79. Investment will increase, if

(a) Marginal efficiency of capital = Rate of interest

(b) Rate of interest > Marginal efficiency of capital

(c) Marginal efficiency of capital > Rate of interest

(d) Marginal efficiency of capital = Zero

Ans. c

80. Fisher effect is an adjustment of nominal interest rate to changes in

(a) deflation rate

(c) disinflation rate

(b) inflation rate

(d) None of these

Ans. b

81. How would a decrease in the natural rate of unemployment affect the long-run Phillips curve?

(a) It would shift the long-run Philips curve right

(b) It would shift the long-run Phillips curve left

(c) There would be an upward movement along a given long-run Phillips curve

(d) There would be a downward movement along a given long-run Phillips curve

Ans. b

82. According to Keynes, the main cause of inflation is

(a) inflationary gap

(b) deflationary gap

(c) excess demand at the level of full employment

(d) None of the above

Ans. c

83. In Keynesian view if an economy is below.. price rise is not inflation.

(a) less than full employment

(b) over full employment

(c) natural rate of employment

(d) full employment

Ans. d

84. The aggregate demand curve shifts to the left when

(a) the money supply falls

(c) taxes are increased

(b) the price level increases

(d) All of these

Ans. c

85. A horizontal aggregate supply curve below the level of full employment is most consistent with which of the following views of the economy?

(a) Keynesian

(c) Supply side

(b) Monetarist

(d) Consensus

Ans. a

86. Deficient demand causes

(a) deflation

(c) inflationary gap

(b) excess deflationary gap

(d) deflationary gap

Ans. d

87. The aggregate demand curve shifts to the right when

(a) the money supply increases

(b) net exports increase

(c) taxes are increased

(d) Both ‘a’ and ‘b’

Ans. d

88. At the natural rate of unemployment

(a) Actual inflation > Expected inflation

(b) Actual inflation < Expected inflation

(c) Actual inflation = Expected inflation

(d) None of the above

Ans. c

89. The sudden rise in the OPEC oil prices during 1970’s due to Arab- Israel war is famous example of

(a) wage push inflation

(b) supply deflation

(c) supply shock inflation

(d) supply inflation

Ans. c

90. Which of the following will definitely cause the value of the misery index to increase?

(a) greater stagflation

(b) a leftward shift of the Phillips curve

(C) a rightward shift of the aggregate supply curve

(d) All of the above

Ans. a

91. Wage push inflation is caused when

(a) wage raise is higher than rise in labour productivity

(b) wage raise is lower than rise in labour productivity

(c) wage raise is equal to rise in labour productivity

(d) None of the above

Ans. a

92. An adverse supply shock causes inflation to

(a) rise and the short-run Phillips curve to shift right

(b) rise and the short-run Phillips curve to shift left

(c) fall and the short-run Phillips curve to shift right

(d) fall and the short-run Phillips curve to shift left

Ans. a

93. The long-run aggregate supply curve is

(a) a vertical line passing through the non-inflationary rate of output

(b) a vertical line passing through the current level of output

(c) a vertical line passing through the natural rate level of output

(d) a horizontal line passing through the current level of output

Ans. c

94. The excess of anticipated expenditure over the available output at base prices is known as

(a) deflationary gap

(b) inflationary gap

(c) time gap

(d) None of the above

Ans. b

95. Which of the following is most likely to cause the aggregate supply curve to shift to the right?

(a) An increase in the money supply

(b) A tax rebate

(c) A decrease in marginal tax rates

(d) A decrease in international trade

Ans. c

96. Which of the following does not cause the aggregate demand curve to shift to the right?

(a) An increase in net exports

(b) An increase in government spending

(c) An increase in taxes

(d) An increase in consumer optimism

Ans. d

97. The rate of unemployment corresponding to a real wage which tends to clear off from the labor market is known as

(a) frictional rate of unemployment

(b) structural unemployment

(c) natural rate of unemployment

(d) None of the above

Ans. c

98. Structuralist approach explains the problems of inflation in

(a) developed countries

(c) Both ‘a’ and ‘b’

(b) less developed countries

(d) None of the above

Ans. b

99. Which of the following is not a structural imbalance which cause inflation?

(a) Food scarcity

(b) Excess of capital and shortage of labour

(c) Social and political constraints

(d) Infrastructural bottleneck

Ans. b

100. Lower unemployment and lower inflation rates can best be achieved with a

(a) rightward shift of the Phillips curve

(b) rightward shift of the aggregate supply curve

(c) rightward shift of the aggregate demand curve

(d) leftward shirt of the aggregate supply curve

Ans. b

101. Demonetisation of currency is a measure to solve the problem of

(a) Stagflation

(c) inflation

(b) Disinflation

(d) Deflation

Ans. c

102. In Friedman’s modern quantity theory, changes in the money supply are

(a) unrelated to changes in the price level

(b) unrelated to changes in inflation

(c) unrelated to shifts in the aggregate demand curve

(d) the primary source of changes in aggregate spending

Ans. d

103. Which of the following can cause a leftward shift in the aggregate supply curve?

(a) A major natural disaster such as hurricane or earthquake

(b) Lower marginal tax rates

(c) A bumper agriculture crop

(d) All of the above

Ans. a

104. Tax cuts serve as a policy level for

(a) Keynesians in developing human capital

(b) Supply siders by shifting the Phillips curve to the left

(c) Monetarists to shift long-run full employment to the right

(d) All of the above

Ans. b

105. The aggregate demand curve increases when

(a) net exports decrease

(b) taxes increase

(c) net exports increase

(d) All of the above

Ans. c

106. Inflationary gap is equal to

(a) deficit demand

(b) zero demand

(c) aggregate demand

(d) excess demand

Ans. d

107. An increase in the expected inflation rate leads to the short-run Phillips curve. …….

(a) a movement downward along

(b) a movement upward along

(c) a downward shift of

(d) an upward shift of

Ans. d

108. Deficit financing leads to

(a) deflation

(b) inflation

(c) no change in price

(d) None of these

Ans. b

109. Cost push inflation can start with

(a) an increase in oil prices

(b) a decrease in the quantity of money

(c) an increase in government expenditures

(d) a decrease in investment

Ans. a

110. Which of the following can start an inflation?

(a) An increase in aggregate demand

(b) An increase in aggregate supply

(c) A decrease in aggregate supply

(d) Both ‘a’ and ‘c’ are correct

Ans. d

111. Which of the following is held constant when moving along a short-run Phillips curve?

(a) The expected inflation rate

(b) The growth rate of the quantity of money

(c) The unemployment rate

(d) The inflation rate

Ans. c

112. In the above equation, ‘b’ stands for

(a) average consumption level

(b) the amount of consumption when income is zero

(c) the marginal propensity to save

(d) None of the above Answers

Ans. d

Directions (Q. Nos. 113-117) In the equation C= A+bY, which describes the aggregate consumption function, let us assume that autonomous investment is rs. 100 crore, and 20% of the additional income is saved and dissavings of the consumer stands at rs. 10 crore

113. According to the above statement, marginal propensity to consume will be

(a) 0.20

(b) 0.50

(c) 0.80

(d) None of these

Ans. a

114. The level of national income would be

(b) 550 crore

(d) None of these

(a) 450 crore

(c) 650 crore

Ans. b

115. Consumption at equilibrium level of income would be

(a) rs. 450 crore

(c) rs. 650 crore

(b) rs. 550 crore

(d) None of these

Ans. a

116. What would be the Average Propensity to Save (APS) at equilibrium level of income?

(a) 0.20

(c) 0.38

(b) 0.18

(d) None of these

Ans. d

117. Inflationary gap is equal to

(b) zero demand

(d) excess demand

(a) defiçit demand

(c) aggregate demand

Ans. d

118. Demand pull inflation is an inflation that results from an initial

(a) increase in wage rates

(b) increase in natural resource prices

(c) increase in aggregate demand

(d) decrease in aggregate demand

Ans. c

119. The Phillips curve shows the relationship between the

(a) nominal interest rate and the real interest rate

(b) real interest rate and the unemployment rate

(c) unemployment rate and the inflation rate

(d) expected rate of inflation and the nominal interest rate

Ans. c

120. Fall in general price level below the base year lever known as

(a) inflation

(b) disinflation

(c) deflation

(d) higher inflation

Ans. c

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