MCQOPTIONS
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MCQOPTIONS
This section includes 44 Mcqs, each offering curated multiple-choice questions to sharpen your Economics knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
Which school of economic thought suggested that one possible cause of inflation was a ‘push’ from the cost side ? |
| A. | New classical economists |
| B. | Keynesian |
| C. | Marxists |
| D. | Monetarists |
| Answer» C. Marxists | |
| 2. |
When economists use the term real business cycle theory they are suggesting that business cycles are caused by ? |
| A. | Shifts in aggregate supply |
| B. | changes in export demand due to the state of the world economy |
| C. | business confidence |
| D. | business expectations |
| Answer» B. changes in export demand due to the state of the world economy | |
| 3. |
We would normally expect the size of the labor force to be _____ than the number or workers willing to accepts job offers at any real wage rate ? |
| A. | Smaller |
| B. | Larger |
| C. | the same size |
| D. | None of these |
| Answer» C. the same size | |
| 4. |
Those who hold the classical view of the labor market are likely to believe that ? |
| A. | neither monetary nor fiscal policy will have an effect on output and employment |
| B. | monetary but not fiscal policy will have an effect on output and employment |
| C. | Fiscal, but not monetary policy will have an effect on output and employment |
| D. | both monetary and fiscal policy will have an effect on output and employment |
| Answer» B. monetary but not fiscal policy will have an effect on output and employment | |
| 5. |
The view of the Phillips curve that prevailed in the 1960s implied that policies that ? |
| A. | lower unemployment rate will tend to lower the inflation rate |
| B. | lower unemployment rate will tend to raise the inflation rate |
| C. | raise inflation rate will tend to raise the unemployment rate |
| D. | lower inflation rate will tend to raise the unemployment rate |
| Answer» C. raise inflation rate will tend to raise the unemployment rate | |
| 6. |
The Short run Phillips curve can shift in response to changes in ? |
| A. | Inflationary expectations |
| B. | unemployment |
| C. | the inflation rates |
| D. | wage rates |
| Answer» B. unemployment | |
| 7. |
The relative-wage explanation for the existence of downwardly sticky wages emphasizes ? |
| A. | the contention that workers in one industry may be unwilling to accept a wage cut unless they know that workers in other industries are receiving simi |
| B. | employment contracts that stipulate workers’ wages usually for a period of one to three years |
| C. | unspoken agreements between workers and firms that firms will not cut wages |
| D. | the incentive that firms may have to hold wages above the market clearing rate |
| Answer» B. employment contracts that stipulate workers’ wages usually for a period of one to three years | |
| 8. |
The quantity theory of money says that changes in ____lead to equivalent changes in ____ but have no effect on ______? |
| A. | prices, wages, output and employment |
| B. | output prices, employment |
| C. | nominal money, the price level, output and employment |
| D. | nominal money output prices |
| Answer» D. nominal money output prices | |
| 9. |
The Phillips curve shows the trade-off between _____ and _____? |
| A. | the inflation rate, interest rates |
| B. | the inflation rate, the unemployment rate |
| C. | interest rates, output |
| D. | output, employment |
| Answer» C. interest rates, output | |
| 10. |
The Phillips curve is a graph showing the relationship between ? |
| A. | the price level and the unemployment rate |
| B. | the inflation rate and the unemployment rate |
| C. | the level of aggregate output and the price level |
| D. | the inflation rate and the level of aggregate demand |
| Answer» C. the level of aggregate output and the price level | |
| 11. |
The Phillips curve indicates that there is a ? |
| A. | negative relationship between the inflation rate and labor demand |
| B. | positive relationship between labor supply and the inflation rate |
| C. | positive relationship between the inflation rate and the employment |
| D. | negative relationship between the inflation rate and the unemployment rate |
| Answer» E. | |
| 12. |
The natural rate of unemployment is generally thought to be the sum of ? |
| A. | frictional unemployment and seasonal unemployment |
| B. | frictional unemployment and cyclical unemployment |
| C. | frictional unemployment and structural unemployment |
| D. | cyclical unemployment and structural unemployment |
| Answer» D. cyclical unemployment and structural unemployment | |
| 13. |
The measured unemployment rate can be pushed below the natural rate, but ? |
| A. | only in the short run, and not without inflation |
| B. | only in the long run and not without inflation |
| C. | only is the short run and only if the price level is constant |
| D. | only in the long run and only if the price level is constant |
| Answer» B. only in the long run and not without inflation | |
| 14. |
The long-run Phillips curve is ____ at the ____? |
| A. | horizontal, natural rate of inflation |
| B. | horizontal natural rate of unemployment |
| C. | vertical natural rate of inflation |
| D. | vertical equilibrium rate of unemployment |
| Answer» E. | |
| 15. |
The Keynesian model is a good guide to ____ behavior and the classical model describes behavior in ______? |
| A. | long run, short run |
| B. | flexible imperfect markets |
| C. | short-term long run |
| D. | long run, imperfect markets |
| Answer» D. long run, imperfect markets | |
| 16. |
The expectations augmented Phillips curve was the Work of which group of economists ? |
| A. | New classical economists |
| B. | Keynesian |
| C. | Monetarists |
| D. | Marxists |
| Answer» D. Marxists | |
| 17. |
The equilibrium rate of unemployment at any real wage, is the difference between ______ and ______? |
| A. | those willing to work at the going wage labour demand |
| B. | labour demand those willing to work at the going wage |
| C. | labor demand, labor supply |
| D. | those willing to work at the going wage labor supply |
| Answer» E. | |
| 18. |
The equilibrium inflation rate is determined by the intersection of _____ and _____? |
| A. | demand, supply |
| B. | IS, LM |
| C. | AD, AS |
| D. | Labor demand, labor supply |
| Answer» D. Labor demand, labor supply | |
| 19. |
The costs of inflation are ? |
| A. | shoe leather costs |
| B. | menu costs |
| C. | income redistribution |
| D. | uncertainly |
| E. | all of the above |
| Answer» F. | |
| 20. |
The classical view of the labor market is basically consistent with the assumption of _________ aggregate supply curve? |
| A. | a vertical (or almost vertical) |
| B. | a downward sloping |
| C. | a horizontal (or almost horizontal) |
| D. | an upward sloping |
| Answer» B. a downward sloping | |
| 21. |
The classical model of macroeconomics assumes ? |
| A. | wages and prices are sticky |
| B. | wages and prices are flexible |
| C. | the economy may operate below full capacity |
| D. | the economy is always at full capacity |
| E. | B and D |
| Answer» F. | |
| 22. |
The AD schedule indicates that _______ inflation is associated with ________ output? |
| A. | higher, lower |
| B. | higher, higher |
| C. | lower, lower |
| D. | zero, zero |
| Answer» B. higher, higher | |
| 23. |
Potential GDP is the level of aggregate output ? |
| A. | that can be produced if structural unemployment is zero |
| B. | that can be produced at a zero-unemployment rate |
| C. | that can be sustained in the long run without inflation |
| D. | that can be sustained in the long run, if the inflation rate is zero |
| Answer» D. that can be sustained in the long run, if the inflation rate is zero | |
| 24. |
Possible causes of involuntary unemployment are ? |
| A. | minimum wage agreements |
| B. | trade |
| C. | scale economies |
| D. | insider-outsider distinctions |
| E. | all of the above |
| Answer» F. | |
| 25. |
Policies to reduce unemployment by reducing union power, tax cuts, reductions in unemployment benefit and investment subsidies are examples of ? |
| A. | Keynesian policies |
| B. | Supply-side policies |
| C. | Monetarist Policies |
| D. | Classical policies |
| Answer» C. Monetarist Policies | |
| 26. |
one of the tenets of the classical view of the labor market is that the wage adjustments that are necessary to clear the labor market occur ? |
| A. | quickly |
| B. | slowly |
| C. | very infrequently |
| D. | instantly |
| Answer» B. slowly | |
| 27. |
In the long run, the Phillips curve will be vertical at the natural rate of unemployment if ? |
| A. | the long-run aggregate demand curve is horizontal at the natural rate of inflation |
| B. | the long run aggregate demand curve is vertical at potential GDP |
| C. | the long run aggregate demand curve is vertical at potential GDP |
| D. | The long run supply curve is horizontal at the natural rate of inflation |
| Answer» D. The long run supply curve is horizontal at the natural rate of inflation | |
| 28. |
In the events of an increase in the international price of oil that encouraged the central bank to accept lower real interest rates, inflation would most likely ? |
| A. | fall |
| B. | increase |
| C. | remain the same |
| D. | fluctuates |
| Answer» C. remain the same | |
| 29. |
In the classical model, potential output cannot be increased by ? |
| A. | monetary growth |
| B. | better technology |
| C. | more capital |
| D. | higher labor supply |
| Answer» B. better technology | |
| 30. |
If the income tax rate changes from 30% to 40% on income over Rs30,000 and a person’s income is Rs 31,000 then her marginal tax rate is ? |
| A. | 30% |
| B. | 10% |
| C. | 70% |
| D. | 40% |
| Answer» E. | |
| 31. |
If somebody is prepared to work at the going wage rate but cannot find work then they are victims of ? |
| A. | voluntary unemployment |
| B. | classical unemployment |
| C. | voluntary unemployment |
| D. | Frictional unemployment |
| Answer» D. Frictional unemployment | |
| 32. |
If input price prices adjusted very rapidly to output prices as classical economists argue the Philips curve would be ? |
| A. | Vertical or nearly vertical |
| B. | upward sloping |
| C. | downward sloping |
| D. | horizontal or nearly horizontal |
| Answer» B. upward sloping | |
| 33. |
If a person thinks they are better off after a 10% wage increase, and all prices have risen 10% then they are experiencing ? |
| A. | inflation |
| B. | a supply shock |
| C. | crowding out |
| D. | inflation illusion |
| Answer» E. | |
| 34. |
Governments may contribute to inflationary pressure because of building up large ? |
| A. | numbers of employees |
| B. | welfare plans |
| C. | budget deficits |
| D. | expenditures |
| Answer» D. expenditures | |
| 35. |
Expansionary fiscal policy in the classical model will cause aggregate demand to _______ potential output? |
| A. | exceeds |
| B. | fall below |
| C. | fluctuate around |
| D. | remain equal to |
| Answer» E. | |
| 36. |
Even though explicit contracts may lead to layoffs during recessions explicit contracts may still be efficient because such contracts ? |
| A. | minimize negotiation costs |
| B. | minimize unemployment effects |
| C. | guarantee that only the least productive workers will be laid off. |
| D. | will equitable spread the layoffs among junior and senior workers |
| Answer» B. minimize unemployment effects | |
| 37. |
During Periods of rising inflation and rising interest rates we expect the demand for real cash to ? |
| A. | rise |
| B. | fall |
| C. | not changes |
| D. | fluctuates |
| Answer» B. fall | |
| 38. |
Doubts about the natural and the existences of the Phillips curve arose in the 1970s when the economy experienced ? |
| A. | a high rate of inflation: along with a low rate of unemployment |
| B. | simultaneously low rates of inflation and unemployment |
| C. | simultaneously high rates of inflation and unemployment |
| D. | a high rate of unemployment along with a low rate of inflation |
| Answer» D. a high rate of unemployment along with a low rate of inflation | |
| 39. |
At the intersection of AD and AS equilibrium is achieved in ? |
| A. | the goods market |
| B. | the money markets |
| C. | the labor markets |
| D. | all of these |
| Answer» E. | |
| 40. |
An unspoken agreement between workers and firms that the firm will not cut wages is known as ? |
| A. | an implicit or social contract |
| B. | a relative-wage contract |
| C. | employment at will |
| D. | an explicit contract |
| Answer» B. a relative-wage contract | |
| 41. |
An advocate of the classical model of the economy would claim that unemployment is created when the ____ is above its equilibrium level in the ______? |
| A. | price level, aggregate economy |
| B. | tax rate, government budget |
| C. | wage rate, labor market |
| D. | interest rate, market for loanable funds |
| Answer» D. interest rate, market for loanable funds | |
| 42. |
All the following are types of monetary policy expect ? |
| A. | a nominal money stock target |
| B. | a balanced budget |
| C. | an inflation target |
| D. | The pursuit of a target real interest rate |
| Answer» C. an inflation target | |
| 43. |
According to the classical economists, those who are not working ? |
| A. | have chosen not to work at the market wage |
| B. | have given up looking for a job but would accept a job at the current wage if one were offered to them. |
| C. | are too productive to be hired at the current wage |
| D. | are unable to find a job at the current wage rate |
| Answer» B. have given up looking for a job but would accept a job at the current wage if one were offered to them. | |
| 44. |
A person who is made redundant because of the contraction of an industry is a victim of ? |
| A. | frictional unemployment |
| B. | demand-deficient unemployment |
| C. | classical unemployment |
| D. | structural unemployment |
| Answer» E. | |