1. The optimum capital stock is achieved when the user cost of capital is equal to -
(A) The interest rate
(B) The depreciation rate
(C) Tobin's Q
(D) The marginal product of capital
Ans) D
2. Non-Accelerating Inflation Rate of Unemployment (NAIRU) means :
(A) A rate of inflation which makes the rate of unemployment zero.
(B) A rate of unemployment for which change in the rate of inflation is zero.
(C) A rate of inflation for which the change in the rate of unemployment is zero.
(D) A rate of unemployment which is equal to the rate of inflation.
Ans) B
3. Which amongst the following is not correctly matched ?
(A) New Classical Economics – Robert Lucas
(B) Multiple effect of Balanced Budget – T.H. Haavelmo
(C) New Keynesian Economics – Paul Romer
(D) Permanent Income Hypothesis – M. Friedman
Ans) C
4. The negative relationship between the gap between actual GNP and its trend and the difference between actual unemployment rate and its equilibrium value is called -
(A) The Aggregate Supply Curve
(B) Okun's Law
(C) The Natural Rate of Unemployment
(D) The Phillips Curve
Ans) B
5. Which of the following are correctly matched.
I. Transitory income - Milton Friedman
II. Absolute income - Duseberry
III. Life cycle income - JM Keynes
(A) Only I is correct
(B) I and II are correct
(C) I, II and III are correct
(D) I, II and III are incorrect
Ans) A
6. National Income is most accurately represented by -
(A) GNP at factor cost
(B) NNP at market price
(C) NNP at factor cost
(D) GNP at market price
Ans) C
7. Which of the following statements is/are true?
I. The multiplier effect refers to the idea that an initial increase in investment leads to a larger overall increase in national income.
II. The accelerator effect describes how changes in national income can lead to changes in investment.
(A) Only II
(B) Both I and II
(C) Only I
(D) None of the above
Ans) B
8. The demand for money becoming infinitely elastic due to low interest rate is called -
(A) Real balance effect
(B) Backwash effect
(C) Liquidity trap
(D) Speculative demand
Ans) C
9. Autonomous investment is influenced by -
(A) The level of income
(B) The rate of interest
(C) Both (A) and (B)
(D) Neither (A) nor (B)
Ans) D
10. Frictional unemployment exists due to -
(A) Deficiency in effective demand
(B) Lag between losing one job and finding another
(C) Depression phase of business cycle
(D) None of the above
Ans) B
11. If the money supply were reduced, then -
(A) The IS curve would shift up to the left
(B) The IS-curve would shift up to the right
(C) The LM curve would shift up to the right
(D) The LM curve would shift up to the left
Ans) D
12. Which of the following are correct?
I. O < MPC < 1
II. O < MPS < 1
III. MPC > 1
IV. MPC + MPS = 1
(A) I, II, IV are correct
(B) I, II, III are correct
(C) I and III are correct
(D) I, II, III and IV are correct
Ans) A
13. There are four phases of a business cycle. Identify the correct sequence of the occurrence of these phases -
(A) Recovery, Recession, Expansion, Depression
(B) Recovery, Expansion, Depression, Recession
(C) Depression, Expansion, Recession, Recovery
(D) Recovery, Expansion, Recession, Depression
Ans) D
14. Who authored the article "The role of monetary policy" in 1968?
(A) Milton Friedman
(B) Gregory Mankiw
(C) James Tobin
(D) PA Samuelson
Ans) A
15. A simultaneous rise in GDP and fiscal deficit suggests -
(A) Government is reducing expenditure
(B) Government is following expansionary fiscal policy
(C) Private sector contraction
(D) Monetary tightening
Ans) B
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