Deck 1: Classical Economic Theory

Question 1

The classical economists believed that the demand for labour is a function of:

A)total money wages
B)money wage rate
C)total real wages
D)real wage rate

Answer 1

real wage rate

Question 2

The idea that a general cut in wages will finally lead to a state of full employment was suggested by :

A)keynes
B)marshall
C)j.b.say
D)a.c.pigou

Answer 2

a.c.pigou

Question 3

Say's law of market says:

A)supply creates its own demand
B)demand creates supply
C)income generates demand
D)savings create demand

Answer 3

supply creates its own demand

Question 4

The aggregate production function implied under classical theory is :

A)long run
B)short run
C)no time element
D)none of the above

Question 5

In the Cambridge equation of M = kPR, the value of kis:

A)m/v
B)1/v
C)v in fisher's equation
D)none of these

Question 6

As a result of an increase in capital, ceteris paribus, ------- the marginal productivity of labour:

A)remains constant
B)increase
C)decreases
D)none of these

Question 7

In the Fisher's extended equation of exchange MI VI represents:

A)credit money
B)primary money
C)both primary andcredit money
D)general price level

Question 8

In Fisher's transaction velocity model, one of the following is not an assumption:

A)velocity of circulation of money is constant
B)the volume of transactions is constant
C)full employment
D)p is considered as an active factor

Question 9

The cash balance equation M = KPO was given by:

A)keynes
B)pigou
C)robertson
D)marshall

Question 10

In the equation MV+ MI VI = PT, 'M 'denotes:

A)velocity of money
B)money in circulation
C)bank deposit
D)none of these

Question 11

I classical demand for money, the relationship between money supply and price level is:

A)proportional
B)non-proportional
C)neither proportional nor non-proportional
D)none of these

Question 12

As per classical theory saving is:

A)an increasing function of rate of interest
B)decreasing function of rate of interest
C)decreasing function of level of income
D)none of these

Question 13

The Cambridge version of the quantity theory of money was developed by:

A)fisher
B)alfred marshall
C)pigou
D)keynes

Question 14

In classical system which of the following keeps the economy at full employment:

A)level of saving
B)increase in money supply
C)adjustment in investment
D)adjustment in money wages

Question 15

In Fisher's equation of exchange MV=PT, the variation of which produces a proportional change in price:

A)m
B)v
C)p
D)t

Question 16

In classical theory which of the following is found in the economy:

A)unemployment
B)involuntary unemployment
C)less than full employment
D)full employment

Question 17

In MV=PT, if M doubles and V and T remain constant, then P will:

A)double
B)1/2
C)1
D)4

Question 18

Pigou's version of Cambridge equation is:

A)m = kp/y
B)p= kr/m
C)mv = pt
D)mv = mivi

Question 19

The quantity theory of money was restated by:

A)alfred marshall
B)milton friedman
C)irving fisher
D)j.m. .keynes

Question 20

The law which states that supply creates its own demand and overproduction is impossible is known as:

A)the law of supply
B)say's law of market
C)law of demand
D)law of macro economics

Question 21

Wages and prices do not adjust quickly to restore general equilibrium is a property of

A)classical economics
B)keynesian economics
C)monetary economics
D)supply side economics

Question 22

Classicals treated money as a:

A)medium of exchange
B)store of value
C)both
D)none