Chapter: Trade Cycles
101.

Cost of living increases when business cycle is

A. Expanding
B. Contracting
C. At peak
D. At lowest point
Answer» C. At peak
102.

All but one are the endogenous factors of business cycle

A. War
B. Changes in government spending
C. Money supply
D. Fluctuations in investment
Answer» A. War
103.

Fall in the interest rate is a typical feature of

A. Recovery
B. Boom
C. Depression
D. Contraction
Answer» C. Depression
104.

During depression __________industry suffer from excess production capacity

A. Capital goods
B. Consumer durable goods
C. Non-durable goods
D. Both (a) and (b
Answer» D. Both (a) and (b
105.

The lowest level of economic activity is called

A. Contraction
B. Trough
C. Recovery
D. None of them
Answer» B. Trough
106.

Which of the following is notthe feature of business cycle?

A. Business cycle follow perfectly timed cycle
B. Business cycle vary in intensity
C. Business cycle vary in length
D. Aggregate economic activity
Answer» A. Business cycle follow perfectly timed cycle
107.

At the time of Great Depression of 1930s, the global GDP fell by around

A. 12 %
B. 14 %
C. 15 %
D. 10 %
Answer» C. 15 %
108.

Which of the following describes best a typical trade cycle?

A. Economic expansions are followed by economic contractions
B. Inflation is followed by rising income and employment
C. Economic expansions are followed by economic growth and development
D. Stagflation followed by rising employment
Answer» A. Economic expansions are followed by economic contractions
109.

During upswing, the unemployment rate and output

A. Rises; falls
B. Rises; rises
C. Falls; rises
D. Falls ; falls
Answer» A. Rises; falls
110.

If any unemployment exists during expansion phase of business cycle, it is

A. Voluntary and frictional
B. Technological and structural
C. Frictional and structural
D. Structural and involuntary
Answer» C. Frictional and structural
111.

The most probable outcome of increase in aggregate demand is

A. Expansion of economic activity
B. Contraction of economic activity
C. Stable economic activity
D. Volatile economic activity
Answer» A. Expansion of economic activity
112.

Economic recession is characterized by all of the following except

A. Decline in investment, employment
B. Increase in the price of inputs due to increased demand for inputs
C. Investors’ confidence is shaken
D. Demand for goods, service decline
Answer» B. Increase in the price of inputs due to increased demand for inputs
113.

Understanding business cycle is important for business managers because

A. They affect the demand for their products
B. They affect their profits
C. To frame appropriate policies and forward planning
D. All of the above
Answer» D. All of the above
114.

Which indicators change before the economy itself changes

A. Lagging
B. Coincident
C. Leading
D. Concurrent
Answer» C. Leading
115.

Which indicators change after the economy as a whole changes

A. Lagging
B. Coincident
C. Leading
D. Concurrent
Answer» A. Lagging
116.

A variable that occur simultaneously with the business cycle movements is

A. Leading indicator
B. Lagging indicator
C. Coincidentindicator
D. Cyclical indicator
Answer» C. Coincidentindicator
117.

The principle of accelerator explains the process by which

A. An increase (or decrease) in the demand for consumption goods leads to an increase (or decrease) in the investment on capital goods
B. The ratio between induced investment and an initial change in consumption expenditure
C. An increase (or decrease) in the investment on capital goods leads to an increase (or decrease) in the demand for consumption goods
D. None of the above
Answer» A. An increase (or decrease) in the demand for consumption goods leads to an increase (or decrease) in the investment on capital goods
Chapter: Inflation
118.

Inflation is a situation when

A. Prices of some goods rise
B. General price level rises continuously
C. Prices double every year
D. Prices rise and fall
Answer» B. General price level rises continuously
119.

An inflation caused by an enhanced wages of labour is

A. Demand-pull inflation
B. Cost-push inflation
C. Hyperinflation
D. Stagflation
Answer» B. Cost-push inflation
120.

Inflation in under-developed country is basically caused by

A. Mass poverty
B. Less production
C. Lack of technical know-how
D. Market imperfection
Answer» D. Market imperfection
121.

According to Keynes, inflationary gap is caused by

A. excess supply
B. excess demand
C. deficiency of demand
D. deficiency of supply
Answer» B. excess demand
122.

Stagflation implies a situation of

A. High inflation and high unemployment
B. Low unemployment and low inflation
C. High inflation and low unemployment
D. Low inflation and high unemployment
Answer» A. High inflation and high unemployment
123.

Demand- Pull inflation is caused by an

A. Increase in the aggregate effective demand for goods and services
B. Increase in the money incomes of the factors of production
C. Increased investment in the economy
D. All of the above
Answer» A. Increase in the aggregate effective demand for goods and services
124.

Which of the following is a monetary measure to control inflation in an economy?

A. Increase in money supply
B. Demonetization of currency
C. Increase in government expenditure
D. All of the above
Answer» B. Demonetization of currency
125.

In Keynesian view, inflation is

A. The rise in the price level after the point of full employment
B. A rise in the price level before the point of full employment
C. Too much money chasing too few goods
D. All of the above
Answer» A. The rise in the price level after the point of full employment
126.

“Inflation is a state in which the value of money is falling i.e., prices are rising”.Who said this?

A. Hansen
B. Keynes
C. Crowther
D. Fisher
Answer» C. Crowther
127.

If inflation is allowed to continue without any check, it is known as

A. Supressed inflation
B. Normal inflation
C. Open inflation
D. Deflation
Answer» C. Open inflation
128.

When both prices and money income fall, the situation is called

A. Disinflation
B. Recession
C. Deflation
D. Anti-inflation
Answer» C. Deflation
129.

Inflation in a developed country usually sets in

A. Before the point of full employment
B. After the point of full employment
C. at the point full employment
D. None of the above
Answer» B. After the point of full employment
130.

During inflation, who suffers the most?

A. Wage and salary earners
B. Creditors
C. Debtors
D. Businessman
Answer» A. Wage and salary earners
131.

When government interrupts price rise, there is

A. Suppressed inflation
B. Reflation
C. Open inflation
D. Deflation
Answer» A. Suppressed inflation
132.

The phenomenal rise in prices accompanied by increased real income is known as

A. inflation
B. deflation
C. reflation
D. None of the above
Answer» C. reflation
133.

Which of the following measure proves effective in reducing the rate of inflation?

A. Decreased personal consumption
B. Evaluation of currency
C. Increased taxation
D. All of the above
Answer» C. Increased taxation
134.

Inflation can be controlled by applying:

A. Monetary and fiscal policies
B. Monetary and labour policy
C. Fiscal and Commercial Policies
D. All of the above
Answer» A. Monetary and fiscal policies
135.

During inflation

A. Lenders lose, borrowers gain
B. Borrowers lose, lenders gain
C. Borrowers and lenders both lose
D. All sections of the society gain
Answer» A. Lenders lose, borrowers gain
136.

Which people are most likely to gain during inflation?

A. Those living on pension
B. Those living on their savings
C. Those who are repaying borrowed money
D. Those who have lent money
Answer» C. Those who are repaying borrowed money
137.

Inflation leads to

A. Distribution of income equal
B. Distribution of income unequal
C. No effect on distribution of income
D. Affects only industrial sector
Answer» B. Distribution of income unequal
138.

Inflation in an under-developed economy generally sets in

A. Before the point of full employment
B. After the point of full employment
C. At the point of full employment level
D. All of the above
Answer» A. Before the point of full employment
139.

Which of the following measure is adopted to reduce inflation?

A. Reduction in bank rate
B. Reduction in Repo rate
C. Increase in government expenditure
D. Cuts in government spending
Answer» D. Cuts in government spending
140.

According to the monetarists, inflation is caused by

A. Supply shocks
B. Expansionary fiscal policies
C. Expansionary monetary policies
D. Government regulations
Answer» C. Expansionary monetary policies
141.

Theoretically, one can distinguish a demand- pull inflation from a cost-push inflation by comparing

A. How fast prices rise relative to wages
B. The unemployment rate with its natural rate level
C. When prices rise relative to wages
D. None of the above
Answer» B. The unemployment rate with its natural rate level
142.

Demand-pull inflation arises when

A. Policymakers set a very high unemployment target
B. A persistent budget deficit is financed by money creation
C. The deficit is financed by selling bonds to the public
D. All of the above
Answer» B. A persistent budget deficit is financed by money creation
143.

Government may pursue inflationary monetary policies

A. To promote high employment
B. To accommodate demands of workers for higher wages
C. To finance a persistent budget deficit
D. All of the above
Answer» D. All of the above
144.

Governments may end up with a high money growth rate and high inflation as a result of policies designed to

A. Lower unemployment
B. Finance persistent government budget deficits through money creation rather than by issuing bonds
C. Redistribute wealth from debtors to creditors
D. Both ( a) and (b
Answer» D. Both ( a) and (b
145.

Which of the following is an effect of inflation?

A. Erosion in purchasing power
B. Affects relative price of goods
C. Increase in inequalities of income
D. All of the above
Answer» D. All of the above
146.

Which of the following can be undertaken to control inflation?

A. Control on public expenditure
B. Control on hoarding and black-marketing
C. Effective control on credit
D. All of the above
Answer» D. All of the above
147.

Which of the following is phenomenon that leads to Hyperinflation?

A. It is a situation when aggregate demand in an economy outpaces aggregate supply
B. It is a situation of persistent rise in inflation along with dip in growth and increase in unemployment
C. It is a situation caused by an increase in prices of inputs like labour, raw material etc
D. It is a situation when a nation experiences very high and accelerating inflation
Answer» D. It is a situation when a nation experiences very high and accelerating inflation
148.

Inflationary gap said to exist when

A. Real GDP >Potential GDP
B. Real GDP <Potential GDP
C. Real GDP= Potential GDP
D. Unemployment rate> natural rate of unemployment
Answer» A. Real GDP >Potential GDP
149.

Phillip’s curve shows the relationship between the rate of

A. Unemployment and output growth
B. unemploymentand increase in money wages
C. Employment and inflation
D. All of the above
Answer» B. unemploymentand increase in money wages
150.

According to Phillips curve unemployment will return to the natural rate when:

A. Nominal wages are equal to expected wages
B. Real wages are back at equilibrium level
C. Nominal wages are growing faster than inflation
D. Inflation is higher than the growth of nominal wages
Answer» B. Real wages are back at equilibrium level
151.

An increase in aggregate is more likely to lead to demand pull inflation if:

A. Aggregate supply is perfectly elastic
B. Aggregate supply is perfectly inelastic
C. Aggregate supply is unit inelastic
D. Aggregate supply is relatively inelastic
Answer» B. Aggregate supply is perfectly inelastic
152.

In short-run, unemployment may fall below the natural rate of unemployment if:

A. Nominal wages have risen less than inflation
B. Nominal wages have risen at the same rate as inflation
C. Nominal wages have risen more than inflation
D. Nominal wages have risen less than unemployment
Answer» A. Nominal wages have risen less than inflation
153.

The effects of inflation on the price competitiveness of a country’s products may be offset by

A. An appreciation of the currency
B. A revaluation of the currency
C. A depreciation of the currency
D. None of the above
Answer» C. A depreciation of the currency
154.

Countries with the highest inflation rates are likely to have

A. The highest rate of money growth
B. Large budget deficits
C. The lowest interest rates
D. Both (a) and (b
Answer» D. Both (a) and (b
155.

A one-time increase in the price level is

A. rarely reported by the news media as inflation, but is nevertheless considered to be inflation by economists
B. regularly reported by the news media as inflation, but is not considered to be inflation by economist.
C. regularly reported by the news media as inflation because it is considered to be inflation by economists
D. None of the above
Answer» B. regularly reported by the news media as inflation, but is not considered to be inflation by economist.
156.

Which economist proposed that “ Inflation is always and everywhere a monetary phenomenon”

A. JM Keynes
B. J.R.Hicks
C. Milton Friedman
D. Franco Modigliani
Answer» C. Milton Friedman
157.

According to monetarists, inflation is caused by

A. Supply shocks
B. Expansionary fiscal policies
C. Expansionary monetary policies
D. Rising prices
Answer» C. Expansionary monetary policies
Chapter: Economic Growth
158.

Which of the following is generally regarded as the true index of economic growth?

A. An increase in national income at constant prices during a year
B. A sustained increase in real per capita income
C. An increase in national income at current prices over time
D. An increase in national income along with a corresponding increase in population
Answer» B. A sustained increase in real per capita income
159.

The concept of economic growth is

A. Identical with the concept of economic development
B. Narrower than the concept of economic development
C. Wider as compared to that of economic development
D. Unrelated to the concept of economic development
Answer» B. Narrower than the concept of economic development
160.

Economic growth is measured as a percentage change in

A. Gross Domestic Product
B. Gross National Product
C. Both (a) and (b
D. Government expenditure
Answer» C. Both (a) and (b
161.

The concept of economic growth is more relevant for

A. Developed countries
B. Underdeveloped countries
C. European countries
D. All of the above
Answer» A. Developed countries
162.

Which of the following is not an indicator of economic development?

A. Increase in literacy level
B. Low growth of population
C. Low proportion of labour force in the primary section
D. Decrease in inequality of income
Answer» C. Low proportion of labour force in the primary section
163.

The rate of growth of the economy mainly depends upon

A. The rate of growth of labour force
B. The proportion of national income saved and invested
C. The rate of technological improvements
D. All of the above
Answer» D. All of the above
164.

Among the following determinants of growth, which is a non-economic factor?

A. Natural resources
B. Population growth
C. Favourablelegislation
D. Capital accumulation
Answer» C. Favourablelegislation
165.

Besides increase in output, economic development is concerned with

A. Inputs and their efficiency
B. Equitable distribution of income
C. Life sustenance, self-esteem and freedom from want, ignorance and squalor
D. All of the above
Answer» D. All of the above
166.

The most simple and popular method of measuring economic development is to calculate the trend of Gross National Product (GNP) at

A. Current prices
B. Constant prices
C. Both of the above
D. None of the above
Answer» B. Constant prices
167.

The most important factor in economic development is

A. Quality of human resources
B. Quality of natural resources
C. Quality of governance
D. Quality of banking system
Answer» A. Quality of human resources
168.

When economic development takes place

A. Share of services in GDP increases
B. Share of agriculture in GDP increases
C. Share of industry in GDP increases
D. Both (a) and (c
Answer» D. Both (a) and (c
169.

Which of the following is acting as an obstacle to economic development

A. Shortage of money
B. Urbanization
C. Political instability
D. Shortage of labour
Answer» C. Political instability
170.

The Solow’s growth model assumes that the two factors of production labour and capital are paid according to

A. their marginal physical productivities
B. the skills of the labour
C. the quality of the output
D. None of the above
Answer» A. their marginal physical productivities
171.

Neo-classical growth model considered two-factor production function with

A. Technology and output
B. Capital and labour
C. Labour and technology
D. Capital and technology
Answer» B. Capital and labour
172.

Technological progress helps in

A. Increase in overall productivity
B. Economic growth
C. Both of the above
D. None of the above
Answer» C. Both of the above
173.

The technique of production in which the amount of capital used per unit of labour is larger than that of labour is known as

A. Capital-intensive technique
B. Modern technique
C. Scientific technique
D. All of the above
Answer» A. Capital-intensive technique
174.

Economic growth can be measured in terms of changes in

A. GDP per head in agricultural sector
B. GDP per head of working population
C. Real national income per head
D. All of the above
Answer» C. Real national income per head
175.

Assuming that 3 units of capital are required to produce 1 unit of output, then capitaloutput ratio would be

A. 3 ∶ 2
B. 3 ∶ 1
C. 3 ∶ 3
D. 3 ∶ 4
Answer» B. 3 ∶ 1
176.

With economic growth, the proportion of labour-force engaged in agriculture

A. Increases
B. Decreases
C. Remains unaffected
D. Changes in uncertain manner
Answer» B. Decreases
177.

A strategy of heavy industry is sometimes preferred for a developing economy because it can

A. generate employment opportunities on a large scale
B. provide a strong base for rapid industrialization
C. contain inflationary measures
D. both (a) and (b
Answer» D. both (a) and (b
178.

The incremental capital-output ration (ICOR) refers to the

A. Ratio of investment to change in output
B. Ratio of capital stock to the total output
C. Marginal productivity of capital
D. Financed by the citizens of a country and the income enjoyed by them
Answer» A. Ratio of investment to change in output
179.

Capital-output ratio is determined by

A. Sectoral allocation of capital
B. Level of economic activity
C. Human and natural resources
D. All of the above
Answer» D. All of the above
180.

Which of the following is the indicators of economics growth

A. National income
B. Per capita income
C. Per capita consumption
D. All of the above
Answer» D. All of the above
181.

According to the neo-classical theory, economic development is

A. Gradual
B. Harmonious
C. Cumulative
D. All of the above
Answer» D. All of the above
182.

Which growth model inspired the use of capital-output ratio for development planning?

A. Harrod-Domar model
B. Solow model
C. Kaldor model
D. Feldman model
Answer» A. Harrod-Domar model
183.

Harrod-Domar model of economic growth is based on

A. Underveloped economy
B. Advanced capitalist economy
C. Developing economy
D. All of the above
Answer» B. Advanced capitalist economy
184.

Harrod-Domar model operates in a

A. Closed economy
B. Open economy
C. Both open and closed economy
D. None of the above
Answer» A. Closed economy
185.

Harrod- Domar model is based on

A. Two distinct rates of growth
B. Three distinct rates of growth
C. Four distinct rates of growth
D. Five distinct rates of growth
Answer» B. Three distinct rates of growth
186.

Solow’s model of long-run growth is an improvement over that of

A. J.E. Meade
B. Harrod-Domar
C. J. Robinson
D. A.K.Sen
Answer» B. Harrod-Domar
187.

The major difference between Harrod-Domar and Solow models of growth lies in

A. Returns to scale
B. Returns to variable factors
C. Substitutability between labour and capital
D. Growth of income
Answer» C. Substitutability between labour and capital
188.

Which growth model analyses the contribution of technological progress to the overall growth rate

A. Solow model
B. Kaldor model
C. Harrod model
D. All of the above
Answer» A. Solow model
189.

The saving ratio in Solow’s model is

A. Constant
B. Negative
C. Flexible
D. None of the above
Answer» A. Constant
190.

Which of the following models formed the basis of India’s First Five Year Plan

A. Malanobis model
B. Feldman model
C. Harrod-Domar model
D. Leontief model
Answer» C. Harrod-Domar model
191.

Which of the following models uses three distinct concepts of growth?

A. Ramsey model
B. Harrod-Domar model
C. Solow model
D. Lewis model
Answer» B. Harrod-Domar model
192.

The sequence of the three growth rates in Harod-Domar model is

A. actual, warranted and natural growth rates
B. natural,warranted and actual growth rates
C. warranted, actual and natural growth rates
D. natural,actual and warranted growth rates
Answer» A. actual, warranted and natural growth rates
193.

Which of the following models makes the assumption of constantsaving-income ratio?

A. Kaldor model
B. Leontief model
C. Hoarrod-Domar model
D. Joan Robinson model
Answer» C. Hoarrod-Domar model
194.

For neo-classical theorists, economic under- development is the product of which of the following

A. Inappropriate economic policies and too much state interference in the economy
B. Barriers against free trade
C. Low prices for raw-materials
D. Both (a) and (b
Answer» D. Both (a) and (b
195.

In Harrod-Domar model, the actual growth rate represented by G, is determined by

A. Aggregate demand and aggregate supply
B. Saving ratio and the capital-output ratio
C. Increase in productive capacity
D. Net autonomous investment
Answer» B. Saving ratio and the capital-output ratio
196.

According to Harrod-Domar model, once the steady growth is interrupted and the economy falls into disequilibrium, cumulative forces tend to perpetuate divergence thereby leading to

A. inflation in the economy
B. either secular deflation or secular inflation
C. Low economic growth rates
D. All of the above
Answer» B. either secular deflation or secular inflation
197.

In Solow’s model of economic growth, production takes places under

A. Increasing returns to scale
B. Constant returns to scale
C. decreasing returns to scale
D. None of the above
Answer» B. Constant returns to scale
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