Question 1

Which of the following is not an assumption of classical theory?

Accepted Answer

A)  Price flexibility
B)  Unemployment
C)  Say's law
D)  Neutrality of money B

Question 2

Supply creates its own demand is the Basis of:

Accepted Answer

A)  Classical economics
B)  Keynesian economics
C)  Monetarism
D)  None of these A

Question 3

Saving is a function of

Accepted Answer

A)  Export
B)  Import
C)  Investment
D)  Income D

Question 4

Which of the following cannot be included among the remedies of inflation?

Accepted Answer

A)  Better capacity utilization
B)  by making low bank rate
C)  by reducing budget deficit
D)  by making high bank rate

Question 5

How the inflation can be checked temporarily?

Accepted Answer

A)  Increase in money supply
B)  Decrease in money supply
C)  Increase in wages
D)  Decrease in Tax

Question 6

Which of the following class will not be negatively affected by the higher inflation?

Accepted Answer

A)  The consumer class
B)  The debtor class
C)  Pensioner class
D)  Business class

Question 7

Inflation is the state in which ..............................

Accepted Answer

A)  The value of money decreases
B)  The value of money increases
C)  The value of the money increases first and then decreases
D)  The value of money decreases first and increases later

Question 8

Which policy is effective in the Keynesian range?

Accepted Answer

A)  Monetary policy
B)  Fiscal policy
C)  Incomes policy
D)  None of these

Question 9

In classical theory of employment, there is the possibility of:

Accepted Answer

A)  Voluntary unemployment
B)  No unemployment
C)  Involuntary unemployment
D)  Disguised unemployment

Question 10

"Supply creates its own demand "is a law of:

Accepted Answer

A)  Investment
B)  Inflation
C)  Consumption
D)  Market

Question 11

What is Cost-Push inflation?

Accepted Answer

A)  Increasing money supply
B)  Increasing indirect tax
C)  Population increase
D)  expenditure increase unnecessarily.

Question 12

In classical theory the equality between saving and investment is brought about by:

Accepted Answer

A)  Rate of interest
B)  Income
C)  Consumption
D)  Multiplier

Question 13

The concept of effective demand is associated with the name of

Accepted Answer

A)  Marshall
B)  Keynes
C)  Krugman
D)  Say

Question 14

Which groups are not protected from inflation?

Accepted Answer

A)  Industrial worker
B)  Agricultural farmers
C)  Government pensioners
D)  Saving bank account holders

Question 15

What does the inflation imply?

Accepted Answer

A)  Rise in budget deficit
B)  Rise in prices of consumer goods.
C)  rise in money supply.
D)  Rise in general price index.

Question 16

Entrepreneurs will have no tendency to expand or contract output and employment when

Accepted Answer

A)  AD>AS
B)  AD
C)  AD=AS
D)  None of the above

Question 17

The normal condition of a capitalist economy in classical theory is:

Accepted Answer

A)  Underemployment
B)  Full employment
C)  General unemployment
D)  Frictional unemployment

Question 18

According to classical economists, variations in savings are due to:

Accepted Answer

A)  Level of investment
B)  Rate of interest
C)  Level of employment
D)  None of the above

Question 19

Which of the following is an effect of inflation?

Accepted Answer

A)  Erosion in purchasing power
B)  Affects relative price of goods
C)  Increase in inequalities of income
D)  All the above

Question 20

Excess demand for money, according to Say's law in the Economy:

Accepted Answer

A)  Is greater
B)  Is very less
C)  Is equal to zero
D)  There is no relationship between excess demand for money and Say's Law

Exam 6: Macroeconomic Concepts and Theories