MCQs on Macro Economics Part - 4

Q.1:- Point out which of the following is not an instrument of fiscal policy:

• A cut in the marginal rates of IRPF
• An increase in tobacco taxes
• An increase in the interest rate
• A cut in unemployment compensation

Q.2:- The purpose of financial markets is to:

• Control inflation
• Allocate savings efficiently
• Lower the yield on bonds.
• Increase the price of common stocks.

Q.3:- How are funds allocated efficiently in a market economy?

• The economic unit that is willing to pay the highest expected returnreceives the funds.
• Receipt of the funds is rotated so that each economic unit can receivethem in turn.
• The economic unit that considers itself most in need of fundsreceives them.
• The most powerful economic unit receives the funds

Q.4:- Business cycles are measured from

• boom to bust
• depression to depression
• peak to peak
• recession to recession

Q.5:- Which of the following marks the beginning of a contraction in the business cycle:

• Peak
• Expansion
• Recession
• Trough

Q.6:- Economic indicator of contraction and expansionary phase by measuring real GDP is:

• Business cycle
• Technical indicator
• Leading indicator
• Lagging indicator

Q.7:- Money market mutual funds

• Are involved in acquiring and placing mortgages.
• Are available only to high net-worth individuals.
• Are also known as finance companies.
• Enable individuals and small businesses to invest indirectly in money-market instruments.

Q.8:- Recurrent expansions and contractions of economic activity that take place over several years refers to

• The business cycle
• The business cycle
• Depression
• Disinflation

Q.9:- Which of the following is not an instrument of Fiscal Policy?

• Social Welfare
• Public Debt
• Public Expenditure
• Taxation

Q.10:- In an overheated economy

• Frictional unemployment rate plus structural unemployment rate is less than zero.
• Cyclical unemployment equals zero.
• Actual unemployment rate is less than the natural rate.
• Actual unemployment rate is less than full employment.

Q.11:- National income accountants can avoid multiple counting by:

• Counting both intermediate and final goods.
• Only counting final goods.
• Only counting intermediate goods.
• Including transfers in their calculations.

Q.12:- The sum of the marginal propensity to consume and the marginal propensity to save must be equal to:

• The multiplier
• One
• Zero
• Disposable income

Q.13:- The main objectives of macroeconomic policy is:

• A stable and satisfactory rate of economic growth
• A high and stable level of employment
• A low and stable rate of inflation
• All of the above

Q.14:- Gross investment refers to:

• Net investment after it has been "inflated" for changes in the price level.
• Private investment minus public investment.
• Net investment plus net exports.
• Net investment plus replacement investment.

Q.15:- Which of the following is the smallest dollar amount in the United States?

• Personal income
• Gross domestic product
• Disposable income
• National income

Q.16:- A large underground economy results in an:

• Overstated GDP.
• Understated GDP.
• Understated GDP price index.
• Overstated GDP price index.

Q.17:- To the extent that inflation is unanticipated, it creates winners and losers. Unanticipated inflation helps

• savers at the expense of investors
• taxpayers at the expense of government
• workers at the expense of employers
• borrowers at the expense of lenders

Q.18:- Fiscal policy refers to the policy of government regarding taxation, public expenditure and:

• Policies
• Public Debts
• Budgets
• Deposit

Q.19:- The pure time value of money is known as the:

• Term structure of interest rates.
• Fisher effect.
• Liquidity effect.
• Inflation factor.

Q.20:- If a company agreements today for several future date of real currency exchange, they will be building use of a

• futures rate
• Stock rate
• Forward rate
• stock rate

Q.21:- All of the following are indicators of a recession except

• tax cuts
• stock prices
• average work week for production workers
• interest rates

Q.22:- Which of the following is an effect of inflation?

• Erosion in purchasing power
• Affects relative price of goods
• Increase in inequalities of income
• All the above

Q.23:- The phase after expansion and before contraction is:

• Trough
• Expansion
• Contraction
• Peak

Q.24:- When aggregate economic activity is increasing, the economy is said to be:

• An expansion
• A turning point
• A contraction
• A peak

Q.25:- A reserve ratio of 0.10 means that a bank loans out ________percent of its_______

• 90, excess reserves
• 90, deposit liabilities
• 10, deposit liabilities
• 10, excess reserves

Q.26:- Which of the following is correct?

• Fiscal deficit = Primary Deficit Plus interest
• Primary deficit = Fiscal Deficit Plus interest
• Fiscal deficit = Primary Deficit minus interest
• Primary deficit = Fiscal Deficit minus interest

Q.27:- Setup Corporation buys $100,000 of sand, rock, and cement to produce redi-mix concrete. It sells 10,000 cubic yards of concrete at $30 a cubic yard. The value added by Setup Corporation is:

• $200,000
• Zero dollars
• $100,000
• $300,000

Q.28:- The GDP is the:

• Monetary value of all goods and services, final and intermediate, produced in a specific year.
• Monetary value of all economic resources used in producing a year's output.
• Monetary value of all final goods and services produced within a nation in a particular year.
• National income minus all non-income charges against output.

Q.29:- The amount of after-tax income received by households is measured by:

• Personal income.
• Disposable income
• Discretionary income.
• National income

Q.30:- Which of the following best defines national income?

• all incomes earned by U.S. resource suppliers for their current contributions to production
• the before-tax income received by households
• the market value of the annual output net of consumption of fixed capital
• income received by households less personal taxes

Q.31:- Final goods and services refer to:

• Goods and services purchased by ultimate users, rather than for resale or further processing.
• Goods and services whose value has been adjusted for changes in the price level.
• The excess of U.S. exports over U.S. imports.
• Goods and services thatare unsold and therefore added to inventories.

Q.32:- During inflation and full employment which type of budget is recommended?

• Deficit Budget
• Unbalanced budget
• Surplus Budget
• Balanced Budget

Q.33:- A corporation in which you are a shareholder has just gone bankrupt. Its liabilities are far in excess of its assets. You will be called on to pay:

• A proportional share of all creditor claims based on the number of common shares that you own.
• Nothing.
• An amount that could, at most, equal what you originally paid for the shares of common stock in the corporation.
• A proportionate share of bondholder claims based on the number of common shares that you own.

Q.34:- Balance of payments of a country includes:

• Capital receipts and payments
• Balance of trade
• Both (a) and (b)
• Saving and investment account

Q.35:- Which of the following is a part of business cycle stage?

• Trough
• Depression
• Inflation
• Deflation

Q.36:- ......................... elements of a time series sit above or below the trend line and may recur for a year or longer.

• Seasonal
• Irregular
• Cyclical
• Trend

Q.37:- Delphi method of forecasting technique is a

• Casual Method of forecasting technique
• Time Series Method of forecasting technique
• Qualitative Method of forecasting technique
• Quantitative Method of forecasting technique

Q.38:- The following is not a forecasting tool?

• Organisation charts
• Cash flow statement
• Production charts
• None of the above.

Q.39:- Business cycles share all of these characteristics except

• the interest rates rise
• wage growth slows down
• consumer expenditures decline abruptly
• business inventories of steel, automobiles and other durable goods rise unexpectedly

Q.40:- Which one of the following premiums is compensation for expected future inflation?

• liquidity
• inflation
• interest rate risk
• taxability

Q.41:- The Fisher Effect primarily emphasizes the effects of on an investor's rate of return.

• market
• inflation
• maturity
• default

Q.42:- Suppose that the Indian Express Newspaper reads: “Indian Economy Remains in Recession.” The type of unemployment that would likely occur in this circumstance is

• Frictional Unemployment
• cyclical unemployment
• sustained unemployment
• structural unemployment

Q.43:- When buyers’ spending to purchase goods and services outruns sellers’ capacities to supply them, thus forcing up prices on what is available, _____occurs

• cost-pull inflation
• demand-pull inflation
• monetary inflation
• supply-side inflation

Q.44:- Gross domestic product (GDP) measures and reports output:

• In percentage terms.
• In quantities of physical units (for example, pounds, gallons, and bushels).
• As an index number.
• In dollar amounts

Q.45:- Which of the following activities is excluded from GDP, causing GDP to understate a nation's well-being?

• the child-care services provided by stay-at-homeparents
• the construction of new houses
• government expenditures on military equipment
• the services of used-car dealers

Q.46:- The largest component of national income is:

• Rents.
• Corporate profits.
• Compensation of employees.
• Interest.

Q.47:- Which of the following is an intermediate good?

• The purchase of jogging shoes by a professor
• The purchase of baseball uniforms by a professional base ball team.
• The purchase of gasoline for a ski trip to Colorado
• The purchase of a pizza by a college student.

Q.48:- The official unemployment rate tends to underestimate unemployment because

• It fails to count the employment of all home makers
• It ignores all full-time students who are not actively seeking employment.
• It does not count workers under the age of 14.
• It counts all those who are employed part-time as fully employed.

Q.49:- Which of the following statements is true with regards to fiscal policy?

• It relates to government spending levels and revenue, specially taxes.
• It can be changed frequently.
• It relates to the management of money supply in the economy.
• It is formulated by the Central Bank.

Q.50:- Who formulates the monetary policy?

• The local governing bodies
• The Central government
• Both a. and b.
• The Central Bank