McqMate
These multiple-choice questions (MCQs) are designed to enhance your knowledge and understanding in the following areas: Master of Arts in Economics (MA Economics) .
| 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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