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MCQOPTIONS
This section includes 115 Mcqs, each offering curated multiple-choice questions to sharpen your Master of Arts in Economics (M.A. Economics) knowledge and support exam preparation. Choose a topic below to get started.
| 1. |
When there are vacancies in the job-market, but also high levels of unemployment, then wecould say that this unemployment is? |
| A. | cyclical |
| B. | regional |
| C. | seasonal |
| D. | structural |
| Answer» E. | |
| 2. |
Suppose that the money stock is $10 billion, each dollar generates $ 5worth of spending, andthe 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» E. | |
| 3. |
The economist who proposed that,” inflation is always and every where monetaryphenomenon”was |
| A. | j. m keynes |
| B. | john r hicks |
| C. | milton friedman |
| D. | franco modigliani |
| Answer» D. franco modigliani | |
| 4. |
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» D. reduces the nation’s supply of money | |
| 5. |
Which of the following is true with respect to the monetary approach to the balance ofpayments? |
| 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» B. a balance of payments deficit results from an excess demand of money in the nation | |
| 6. |
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» B. inflation to decelerate with rising employment and output | |
| 7. |
If the aggregate supply curve is perfectly elastic as in the Keynesian model at low level ofnational 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» C. the government budget deficit | |
| 8. |
In the very short term, in the Keynesian model which of the following is fixed and does notchange when GDP changes |
| A. | planned investment |
| B. | planned consumption |
| C. | planned imports |
| D. | all of the above |
| Answer» B. planned consumption | |
| 9. |
Using Keynesian multiplier, MPC= 0.8 and government spending increased by 40 billiondollars. How much will GDP increased? |
| A. | 100 billion dollars |
| B. | 200 billion dollars |
| C. | 300 billion dollars |
| D. | 500 billion dollars |
| Answer» C. 300 billion dollars | |
| 10. |
“In a closed economy with no government; s=100+0.2y investment increases by 100, what isthe increase in consumption? |
| A. | 100 |
| B. | 200 |
| C. | 300 |
| D. | 400 |
| Answer» E. | |
| 11. |
Why does a temporary decrease in government purchases decrease labour supply in theclassical 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» D. the fall in government spending decreases labour demand, decreasing the real wage, and sopeople decreases their labour supply. | |
| 12. |
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» D. 0.81 | |
| 13. |
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» C. 2 & 3 are correct | |
| 14. |
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 risetowards 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» B. (a) & (r) both are correct, but (r) is not the correct explanation of (a) | |
| 15. |
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» C. liquidity preference theory | |
| 16. |
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» B. velocity of money | |
| 17. |
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» D. pigou effect - keynes effect | |
| 18. |
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» E. | |
| 19. |
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 uponat 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» B. (a) is correct, but (r) is not the correct explanation of (a). | |
| 20. |
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» D. both (a) and (r) are incorrect. | |
| 21. |
According to Milton Friedman Theory of permanent component of consumption-expendituredepends 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» E. | |
| 22. |
“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» B. hamilton | |
| 23. |
Assertion (A): Long-run Philips curve is a vertical line at the NAIRUReason (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» D. (a) is true, (r) is false. | |
| 24. |
Relationship between changes in the interest rates and bond pricesCodes : |
| 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» C. ii and iii are correct. | |
| 25. |
New Classical Economics based on Adaptive ExpectationWhich 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» B. 2 alone is correct | |
| 26. |
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» C. output to increase. | |
| 27. |
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» E. | |
| 28. |
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» E. | |
| 29. |
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» E. | |
| 30. |
The economist who proposed that,†inflation is always and every where monetary phenomenonâ€was |
| A. | j. m keynes |
| B. | john r hicks |
| C. | milton friedman |
| D. | franco modigliani |
| Answer» D. franco modigliani | |
| 31. |
what is the foundation of monetarism? |
| A. | quantity theory of money |
| B. | demand theory |
| C. | islm model |
| D. | none of these |
| Answer» B. demand theory | |
| 32. |
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» D. reduces the nation’s supply of money | |
| 33. |
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» B. a balance of payments deficit results from an excess demand of money in the nation | |
| 34. |
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» C. currency + demand deposits + equity shares | |
| 35. |
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» B. inflation to decelerate with rising employment and output | |
| 36. |
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» C. the government budget deficit | |
| 37. |
A decrease in expected future income, ______ consumption expenditure and ______ saving. |
| A. | increases: increases |
| B. | increases: decreases |
| C. | decreases: increases |
| D. | decreases: decreases |
| Answer» D. decreases: decreases | |
| 38. |
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» B. greater than the slope of the 45 degree line | |
| 39. |
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» B. planned consumption | |
| 40. |
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» E. | |
| 41. |
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» E. | |
| 42. |
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» B. a sharp rise in the mpc | |
| 43. |
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» C. 300 billion dollars | |
| 44. |
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» C. shift to the left | |
| 45. |
“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» E. | |
| 46. |
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» D. the fall in government spending decreases labour demand, decreasing the real wage, and sopeople decreases their labour supply. | |
| 47. |
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» D. 0.81 | |
| 48. |
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» C. below which the market rate of interest cannot fall | |
| 49. |
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» C. 1/(1-mps) | |
| 50. |
In whose economic theories, Malthus theories are in the base? |
| A. | adam smith |
| B. | ricardo |
| C. | keynes |
| D. | robin’s |
| Answer» D. robin’s | |