McqMate
| 1. |
The IS-LM Model was developed by |
| A. | j m keynes |
| B. | patinkin |
| C. | hicks and hansen |
| D. | schumpeter |
| Answer» C. hicks and hansen | |
| 2. |
New Classical Economics based on Adaptive Expectation Which one of the following is correct among the following options? |
| A. | 1 alone is correct |
| B. | 2 alone is correct |
| C. | 1 and 2 correct |
| D. | neither 1 nor 2 correct |
| Answer» A. 1 alone is correct | |
| 3. |
According to Keynes, there is |
| A. | no direct relationship between the quantity of money and price level |
| B. | direct relationship between money and price level |
| C. | no direct relationship between demand for money and supply of money |
| D. | direct relationship between demand for money and supply of money |
| Answer» A. no direct relationship between the quantity of money and price level | |
| 4. |
Relationship between changes in the interest rates and bond prices Codes : |
| A. | i and iii are correct |
| B. | i and iv are correct. |
| C. | ii and iii are correct. |
| D. | iii and iv are correct. |
| Answer» B. i and iv are correct. | |
| 5. |
The concepts of inside money and outside money is given by |
| A. | milton friedman |
| B. | j m keynes |
| C. | gurley and shaw |
| D. | none of these |
| Answer» C. gurley and shaw | |
| 6. |
Assertion (A): Long-run Philips curve is a vertical line at the NAIRU Reason (R): Non-accelerating inflation raise of unemployment, more or less, stands accepted |
| A. | both (a) and (r) are false. |
| B. | both (a) and (r) are true, but (r) is not the correct reason. |
| C. | both (a) and (r) are true, and (r) is the explanation. |
| D. | (a) is true, (r) is false. |
| Answer» C. both (a) and (r) are true, and (r) is the explanation. | |
| 7. |
The quantity theory of money first propounded in 1588 by an Italian Economist |
| A. | david hume |
| B. | davanzatti |
| C. | j s mill |
| D. | ricardo |
| Answer» B. davanzatti | |
| 8. |
What is the shape of Long Run Phillips curve is |
| A. | inverted u shape |
| B. | horizontal |
| C. | inverse l shape |
| D. | vertical |
| Answer» D. vertical | |
| 9. |
Which among the followings is not the feature of monetarism? |
| A. | fiscal policy causes no long-term increase in real output |
| B. | only a trade-off in the short-term |
| C. | tend to emphasis supply-side unemployment (natural rate) |
| D. | demand- deficient unemployment big causes |
| Answer» D. demand- deficient unemployment big causes | |
| 10. |
According to Keynes Investment is a function of |
| A. | dumping |
| B. | income |
| C. | saving |
| D. | interest |
| Answer» D. interest | |
| 11. |
“Interest is poorly a monetary phenomenon “is a very famous statement made by |
| A. | j m keynes |
| B. | hamilton |
| C. | friedman |
| D. | j b say |
| Answer» A. j m keynes | |
| 12. |
Which one the following economists is the chief advocate of supply side economics |
| A. | arther laffer |
| B. | robert lucas |
| C. | neil wallace |
| D. | both a and c |
| Answer» A. arther laffer | |
| 13. |
Advocates of New classical Economics are |
| A. | robert lucas |
| B. | neil wallace |
| C. | thomas surgent |
| D. | all of the above |
| Answer» D. all of the above | |
| 14. |
The Laffer curve is associated with |
| A. | new classical economics |
| B. | supply side economics |
| C. | keynesian economics |
| D. | new keynesian economics |
| Answer» B. supply side economics | |
| 15. |
The doctrine of Policy ineffectiveness postulate is associated with |
| A. | new classical economics |
| B. | supply side economics |
| C. | new keynesian economics |
| D. | monetarism |
| Answer» A. new classical economics | |
| 16. |
The concept of Rational expectation is associated with |
| A. | natural rate of unemployment hypothesis |
| B. | new classical hypothesis |
| C. | both a and b |
| D. | none of these |
| Answer» B. new classical hypothesis | |
| 17. |
The idea of Adaptive expectation is associated with |
| A. | natural unemployment rate hypothesis |
| B. | new classical economics |
| C. | both a and b |
| D. | none of these |
| Answer» A. natural unemployment rate hypothesis | |
| 18. |
The idea of rational expectation first given by |
| A. | john muth |
| B. | robert lucas |
| C. | neil wallace |
| D. | thomas surgent |
| Answer» A. john muth | |
| 19. |
Laffer curve links |
| A. | inflation and unemployment |
| B. | tax revenue and tax rate |
| C. | output and unemployment |
| D. | inflation and interest rate |
| Answer» B. tax revenue and tax rate | |
| 20. |
New classical Economics is consistent with |
| A. | policy ineffectiveness postulate |
| B. | policy effectiveness postulate |
| C. | both a and b |
| D. | none of these |
| Answer» A. policy ineffectiveness postulate | |
| 21. |
New Classical Economics is based on |
| A. | rational expectation |
| B. | adaptive expectation |
| C. | backward looking expectation |
| D. | all the above |
| Answer» A. rational expectation | |
| 22. |
Supply side Economics was emerged against the background of |
| A. | 1930’s great depression |
| B. | 2008 global financial crisis |
| C. | 1970’s stagflation |
| D. | none of these |
| Answer» C. 1970’s stagflation | |
| 23. |
The dual decision hypothesis was given by |
| A. | clower |
| B. | crowther |
| C. | robert lucas |
| D. | wallras |
| Answer» A. clower | |
| 24. |
The book Elements of Pure Economics was authored by |
| A. | walras |
| B. | clower |
| C. | robert lucas |
| D. | kaldor |
| Answer» A. walras | |
| 25. |
The Neo Keynesian quantity constrained model is associated with the work of |
| A. | robert j barro |
| B. | robert m clower |
| C. | leonwalrs |
| D. | none of these |
| Answer» B. robert m clower | |
| 26. |
The efficiency wage model is associated with |
| A. | new keynesian economics |
| B. | new classical economics |
| C. | supply side economics |
| D. | keynesian economics |
| Answer» A. new keynesian economics | |
| 27. |
The insider outsider model is associated with |
| A. | new keynesian economics |
| B. | new classical economics |
| C. | supply side economics |
| D. | none of these |
| Answer» A. new keynesian economics | |
| 28. |
The Menu cost model is associated with |
| A. | new classical economics |
| B. | new keynesian economics |
| C. | supply side economics |
| D. | none of these |
| Answer» B. new keynesian economics | |
| 29. |
The New Classical economics was developed against the back ground of |
| A. | 1930‘s depression |
| B. | 1970’ stagflation |
| C. | 2008 subprime crisis |
| D. | none of these |
| Answer» B. 1970’ stagflation | |
| 30. |
Reagonomics is related to |
| A. | supply side economics’ |
| B. | new classical economics |
| C. | new keynesian economics |
| D. | natural unemployment hypothesis |
| Answer» A. supply side economics’ | |
| 31. |
Ratex hypothesis is related to |
| A. | new classical economics |
| B. | supply side economics |
| C. | new keynesian economics |
| D. | none of these |
| Answer» A. new classical economics | |
| 32. |
Inflation can be contained by |
| A. | surplus budget |
| B. | increase in taxation |
| C. | reduction in public expenditure |
| D. | all these three measures |
| Answer» D. all these three measures | |
| 33. |
Gregory Mankiw belongs to |
| A. | new keynesian economics |
| B. | new classical economics |
| C. | supply side economics |
| D. | none of these |
| Answer» A. new keynesian economics | |
| 34. |
According to Hawtrey, the business cycle is caused by |
| A. | variation in the interest of banking system |
| B. | variation in the price level of the economy |
| C. | variation in the money supply by bank |
| D. | all the above |
| Answer» D. all the above | |
| 35. |
Which of the following are main postulates of Supply side Economics |
| A. | cut in tax rate |
| B. | increasing public expenditure |
| C. | both a and b |
| D. | none of these |
| Answer» A. cut in tax rate | |
| 36. |
Which of the following economist is not related to New Classical Economics |
| A. | artherlaffer |
| B. | thomas surgent |
| C. | robert lucas |
| D. | neil walace |
| Answer» A. artherlaffer | |
| 37. |
According to New Classical Economist, Business cycle is due to |
| A. | anticipated policy change |
| B. | unanticipated policy change |
| C. | both a and b |
| D. | none of these |
| Answer» B. unanticipated policy change | |
| 38. |
The shape of Laffer curve is |
| A. | inverted u shape |
| B. | u shape |
| C. | inverse l shape |
| D. | none of these |
| Answer» A. inverted u shape | |
| 39. |
The curve which explains relationship between tax rate and tax revenue is called |
| A. | laffer curve |
| B. | kuznets curve |
| C. | lorenz curve |
| D. | none of these |
| Answer» A. laffer curve | |
| 40. |
According to New classical Economics |
| A. | anticipated policy change will not affect output |
| B. | unanticipated policy change will affect output |
| C. | both a and b |
| D. | none of these |
| Answer» C. both a and b | |
| 41. |
According to New Classical Economics Philips curve is |
| A. | always vertical |
| B. | always horizontal |
| C. | always downward slopping |
| D. | downward slopping in short run and vertical in the long run |
| Answer» A. always vertical | |
| 42. |
Liquidity trap is a situation when, |
| A. | all potential investors expect the rate of interest to rise in future |
| B. | all potential investors expect the rate of interest to fall in future |
| C. | natural rate of interest is above the critical rate of interest |
| D. | demand for money for speculative purpose is interest inelastic |
| Answer» A. all potential investors expect the rate of interest to rise in future | |
| 43. |
The classical economists focussed on the role of money as |
| A. | medium of exchange |
| B. | medium of distribution |
| C. | wealth |
| D. | link between present and future |
| Answer» A. medium of exchange | |
| 44. |
According to Milton Friedman Theory of permanent component of consumption-expenditure depends on i. Transitory income alone ii. Transitory and permanent income iii. Permanent income alone iv. Windfall gains Codes : |
| A. | i and ii are correct |
| B. | i and iii are correct |
| C. | ii and iv are correct |
| D. | only iii is correct |
| Answer» D. only iii is correct | |
| 45. |
The classical model of economic development emphasises |
| A. | laissez-faire policy |
| B. | capital accumulation |
| C. | both (a) and (b) |
| D. | none of these |
| Answer» C. both (a) and (b) | |
| 46. |
Assertion (A): According to Keynes, individuals hold either cash or all bonds. Reasoning (R): Because, according to him, the speculative demand for money is associated with uncertainty. Codes: |
| A. | both (a) and (r) are correct and (r) is the correct explanation of (a). |
| B. | both (a) and (r) are correct, but (r) is not the correct explanation of (a). |
| C. | (a) is correct, but (r) is incorrect. |
| D. | both (a) and (r) are incorrect. |
| Answer» C. (a) is correct, but (r) is incorrect. | |
| 47. |
Speculative demand for money is zero when market rate of interest is |
| A. | more than the ‘critical rate’. |
| B. | more than the market rate of interest but less than the critical rate (i.e. capital gains occur). |
| C. | less than the market rate of interest. |
| D. | lowest (i.e. in liquidity trap). |
| Answer» A. more than the ‘critical rate’. | |
| 48. |
Assertion (A) : There exits inverse relationship between interest rates and bond prices. Reason (R) : A bond price represents the present discounted value of the payments agreed upon at the time when the bond was issued. Codes : |
| A. | both (a) and (r) are correct, and (r) is the correct explanation of (a). |
| B. | (a) is correct, but (r) is not the correct explanation of (a). |
| C. | (a) is correct, but (r) is incorrect. |
| D. | (a) is incorrect, but (r) is correct. |
| Answer» A. both (a) and (r) are correct, and (r) is the correct explanation of (a). | |
| 49. |
According to Says law of market what is the main cause of overproduction? |
| A. | unemployment |
| B. | fall in demand |
| C. | rise in price |
| D. | fall in wage rate |
| Answer» A. unemployment | |
| 50. |
In Classical system how to correct an overproduction or glut in the market? |
| A. | by increasing price o f input |
| B. | by wage cut policy |
| C. | by price cut policy |
| D. | by decreasing production |
| Answer» B. by wage cut policy | |
| 51. |
According to Classical what bring full employment in an economy? |
| A. | flexible wage and rigid price |
| B. | a rigid wage and flexible price |
| C. | wage price flexibility |
| D. | wage price rigidity |
| Answer» C. wage price flexibility | |
| 52. |
What is the effect of monetary policy in a situation of “Liquidity trap”? |
| A. | expansionary monetary policy |
| B. | contractionary monetary policy |
| C. | both expansionary and contractionary monetary policy effective |
| D. | monetary policy ineffective |
| Answer» D. monetary policy ineffective | |
| 53. |
In which of the following market Keynes effect operates? |
| A. | goods market |
| B. | labour market |
| C. | money market |
| D. | all of the above markets |
| Answer» C. money market | |
| 54. |
In which of the following market Pigou effect operates? |
| A. | goods market |
| B. | labour market |
| C. | money market |
| D. | all of the above markets |
| Answer» A. goods market | |
| 55. |
Real balance effect is equal to – |
| A. | pigou effect divided by keynes effect |
| B. | pigou effect into keynes effect |
| C. | pigou effect + keynes effect |
| D. | pigou effect - keynes effect |
| Answer» C. pigou effect + keynes effect | |
| 56. |
Under perfect competition firm hire labour until- |
| A. | money wage rate > general price level |
| B. | money wage rate < general price level |
| C. | money wage rate = general price level |
| D. | both a and c |
| Answer» C. money wage rate = general price level | |
| 57. |
Classical dichotomy is based on – |
| A. | neutrality of money |
| B. | velocity of money |
| C. | medium of exchange of money |
| D. | both a and b |
| Answer» A. neutrality of money | |
| 58. |
Cambridge K is related to – |
| A. | restatement theory of money |
| B. | cash balance approach |
| C. | liquidity preference theory |
| D. | transaction version of quantity theory of money |
| Answer» B. cash balance approach | |
| 59. |
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 rise towards the natural rate of interest. Codes : |
| A. | (a) & (r) both are correct and (r) is the correct explanation of (a) |
| B. | (a) & (r) both are correct, but (r) is not the correct explanation of (a) |
| C. | (a) is correct, but (r) is incorrect. |
| D. | both (a) and (r) are incorrect. |
| Answer» A. (a) & (r) both are correct and (r) is the correct explanation of (a) | |
| 60. |
Which of the following is not specifically mentioned as a determinant of the demand formoney ? |
| A. | wealth |
| B. | nominal yield on alternative assets |
| C. | inflation rate |
| D. | real rate of interest |
| Answer» D. real rate of interest | |
| 61. |
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 : |
| A. | 1 & 3 are correct |
| B. | 1 & 4 are correct |
| C. | 2 & 3 are correct |
| D. | 3 & 4 are correct |
| Answer» B. 1 & 4 are correct | |
| 62. |
The classical economists focused on the role of money as, |
| A. | medium of exchange |
| B. | medium of distribution |
| C. | wealth |
| D. | link between present and future |
| Answer» A. medium of exchange | |
| 63. |
Identify the correct chronological order of the following classical economists. |
| A. | adam smith, malthus, ricardo, mill |
| B. | adam smith, ricardo, malthus, mill |
| C. | adam smith, mill, ricardo, malthus |
| D. | adam smith, malthus, mill, ricardo |
| Answer» B. adam smith, ricardo, malthus, mill | |
| 64. |
Liquidity trap is a situation when, |
| A. | all potential investors expect the rate of interest to rise in future. |
| B. | all potential investors expect the rate of interest to fall in future. |
| C. | natural rate of interest is above the critical rate of interest. |
| D. | none of these |
| Answer» A. all potential investors expect the rate of interest to rise in future. | |
| 65. |
Which of the following statements does not hold true in case of the Keynesian economics? |
| A. | velocity of money is an unstable function of its determinant |
| B. | labor is subject to money illusion |
| C. | as function tends to become flat at levels of output well below full employment and to become steeper ad full capacity is reached |
| D. | as schedule is vertical, and output, and employment are completely supply determined. |
| Answer» D. as schedule is vertical, and output, and employment are completely supply determined. | |
| 66. |
In whose economic theories, Malthus theories are in the base? |
| A. | adam smith |
| B. | ricardo |
| C. | keynes |
| D. | robin’s |
| Answer» C. keynes | |
| 67. |
The equation of exchange is |
| A. | m*p=v*y |
| B. | m+v=p+y |
| C. | m+y=v+p |
| D. | m*v=p*t |
| Answer» D. m*v=p*t | |
| 68. |
The formula to compute the spending multiplier is |
| A. | 1/(mpc+mps) |
| B. | 1/(1-mpc) |
| C. | 1/(1-mps) |
| D. | 1/(c+i) |
| Answer» B. 1/(1-mpc) | |
| 69. |
Liquidity trap sets a loop: |
| A. | below which the discount rate cannot fall |
| B. | above which discount rate cannot rise |
| C. | below which the market rate of interest cannot fall |
| D. | above which market rate of interest cannot rise |
| Answer» B. above which discount rate cannot rise | |
| 70. |
If the Keynesian consumption function is C=10+0.8Yd then, if disposable income is 1000, what is amount of total consumption ? |
| A. | 0.8 |
| B. | 800 |
| C. | 810 |
| D. | 0.81 |
| Answer» C. 810 | |
| 71. |
Why does a temporary decrease in government purchases decrease labour supply in the classical model? |
| A. | people prefer to work less when government is doing less for them. |
| B. | decreased government purchases make people worse off, so they work less hours. |
| C. | the decrease in current or future taxes needed to pay for the decrease in government purchases increases people wealth |
| D. | the fall in government spending decreases labour demand, decreasing the real wage, and sopeople decreases their labour supply. |
| Answer» C. the decrease in current or future taxes needed to pay for the decrease in government purchases increases people wealth | |
| 72. |
As the economy nears full employment the aggregate supply curve tend to |
| A. | become flatter |
| B. | become sleeper |
| C. | shift to the left |
| D. | shift to the right |
| Answer» B. become sleeper | |
| 73. |
“In a closed economy with no government; s=100+0.2y investment increases by 100, what is the increase in consumption? |
| A. | 100 |
| B. | 200 |
| C. | 300 |
| D. | 400 |
| Answer» D. 400 | |
| 74. |
Using Keynesian multiplier, MPC= 0.8 and government spending increased by 40 billion dollars. How much will GDP increased? |
| A. | 100 billion dollars |
| B. | 200 billion dollars |
| C. | 300 billion dollars |
| D. | 500 billion dollars |
| Answer» B. 200 billion dollars | |
| 75. |
According to Keynesian analysis, the great depression was caused by: |
| A. | a lack of spending |
| B. | a sharp rise in the mpc |
| C. | too much investment |
| D. | too much foreign influence on the economy |
| Answer» A. a lack of spending | |
| 76. |
The purpose of Keynesian analysis is to explain what to determines the |
| A. | size of the labor force |
| B. | price level |
| C. | amount of money required in the economy |
| D. | levels of national income, output and employment |
| Answer» D. levels of national income, output and employment | |
| 77. |
In the Keynesian range of the SRAS, if AD shift to the right, then |
| A. | the price level falls |
| B. | the price level rises |
| C. | real gdp is unchanged |
| D. | the price level is unchanged |
| Answer» D. the price level is unchanged | |
| 78. |
In the very short term, in the Keynesian model which of the following is fixed and does not change when GDP changes |
| A. | planned investment |
| B. | planned consumption |
| C. | planned imports |
| D. | all of the above |
| Answer» A. planned investment | |
| 79. |
The slope of the consumption function is (Keynesian) |
| A. | less than the slope of the 45 degree line, but not equal to zero |
| B. | greater than the slope of the 45 degree line |
| C. | equal to the slope of the 45 degree line |
| D. | equal to zero |
| Answer» A. less than the slope of the 45 degree line, but not equal to zero | |
| 80. |
A decrease in expected future income, ______ consumption expenditure and ______ saving. |
| A. | increases: increases |
| B. | increases: decreases |
| C. | decreases: increases |
| D. | decreases: decreases |
| Answer» C. decreases: increases | |
| 81. |
If the aggregate supply curve is perfectly elastic as in the Keynesian model at low level of national incomes, as increase in AD will cause an increase in |
| A. | the rate of inflation |
| B. | the level of real national output |
| C. | the government budget deficit |
| D. | the level of consumer debt |
| Answer» B. the level of real national output | |
| 82. |
Attempts to force inflation below no-accelerating inflation rate of unemployment (NAIRU) will cause: |
| A. | inflation accelerate without any change in employment or output |
| B. | inflation to decelerate with rising employment and output |
| C. | inflation to decelerate with employment and output remaining the same |
| D. | inflation to remain unchanged with fall in employment and output |
| Answer» A. inflation accelerate without any change in employment or output | |
| 83. |
Which of the following is true with respect to the monetary approach to the balance of payments? |
| A. | it views the balance of payments as an essentially monetary phenomenon |
| B. | a balance of payments deficit results from an excess demand of money in the nation |
| C. | a balance of payments surplus results from an excess supply of money |
| D. | balance of payments disequilibrium are not automatically corrected in the long run |
| Answer» A. it views the balance of payments as an essentially monetary phenomenon | |
| 84. |
According to monetarists, money supply constitutes |
| A. | currency+ demand deposits |
| B. | currency +demand deposits+time deposits |
| C. | currency + demand deposits + equity shares |
| D. | currency + all kinds of banks + deposits with other institutions + borrowing |
| Answer» B. currency +demand deposits+time deposits | |
| 85. |
According to monetary approach a revaluation of a nation’s currency |
| A. | increase the nation’s demand for money |
| B. | increase the nation’s supply of money |
| C. | reduces the nation’s demand for money |
| D. | reduces the nation’s supply of money |
| Answer» C. reduces the nation’s demand for money | |
| 86. |
what is the foundation of monetarism? |
| A. | quantity theory of money |
| B. | demand theory |
| C. | islm model |
| D. | none of these |
| Answer» A. quantity theory of money | |
| 87. |
The economist who proposed that,” inflation is always and every where monetary phenomenon”was |
| A. | j. m keynes |
| B. | john r hicks |
| C. | milton friedman |
| D. | franco modigliani |
| Answer» C. milton friedman | |
| 88. |
Suppose that the money stock is $10 billion, each dollar generates $ 5worth of spending, and the NAIRU is 7%. According to the quantity theory of what is nominal GDP (income) |
| A. | $ 350 million |
| B. | $ 70 million |
| C. | $ 35 million |
| D. | $ 50 million |
| Answer» D. $ 50 million | |
| 89. |
When there are vacancies in the job-market, but also high levels of unemployment, then we could say that this unemployment is? |
| A. | cyclical |
| B. | regional |
| C. | seasonal |
| D. | structural |
| Answer» D. structural | |
| 90. |
Demand-side unemployment is partly caused by: |
| A. | imperfections in the labour market |
| B. | occupational and geographic immobility of factors |
| C. | demographic changes |
| D. | a lack of aggregate demand |
| Answer» D. a lack of aggregate demand | |
| 91. |
According to the basic classical model, an increase in the money supply will cause |
| A. | employment to increase. |
| B. | the price level to increase. |
| C. | output to increase. |
| D. | investment to increase. |
| Answer» B. the price level to increase. | |
| 92. |
Why does a temporary decrease in government purchases decrease labour supply in the classical model? |
| A. | the fall in government spending decreases labour demand, decreasing the real wage, and so people decrease their labour supply. |
| B. | the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth. |
| C. | people prefer to work less when the government is doing less for them. |
| D. | decreased government purchases make people worse off, so they work less hours. |
| Answer» B. the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth. | |
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