Business Economics Online MCQ Set 11

QN01. Who is regarded as a father of Business Economics

  1. Joel Dean
  2. Adam Smith
  3. J M Keynes
  4. Ragnar Frisch
Answer

(A)Joel Dean

QN02. Which of the following is not a function of managerial economist

  1. Analysis of under developed economies
  2. Capital project appraisal
  3. Advice on primary commodities
  4. None of these
Answer

(D)None of these

QN03. In the long run all input become ______________

  1. Fixed
  2. Variable
  3. Semi variable
  4. None of these
Answer

(B)Variable

QN04. The product under monopolistic competition are

  1. differentiated with close substitute
  2. perfect substitute
  3. differentiated without close substitute
  4. homogeneous
Answer

(A)differentiated with close substitute

QN05. Automatic fiscal stabilizers

  1. Keep the federal budget balanced
  2. Keep the federal high employment budget balanced
  3. Help to reduce the severity of recessions and inflationary boom periods
  4. Increases structural deficits over the business cycle
  5. Both C & D
Answer

(C)Help to reduce the severity of recessions and inflationary boom periods

QN06. If the tax function is given by T= -20+0.1 Y the average tax rate would

  1. Be 0.1
  2. Fall as income falls
  3. Vary negatively with income
  4. Be -20 _0.1
  5. None of the above
Answer

(B)Fall as income falls

QN07. According to partisan party model,

  1. The primary emphasis of the liberal party is on full employment and income distribution.
  2. The liberal party stresses price stability as their most important goat.
  3. Employment stability is most important to the conservative party.
  4. Only two parties exit.
  5. Both a and d
Answer

(E)Both a and d

QN08. Which of the following statements is(are) correct?

  1. Even the earliest political business cycle and partisan models assume that expectations were rational
  2. The partisan model of fiscal policy cannot be modified to be consistent with rational expectations
  3. The myopic, or short-sighted behaviour of voters is inconsistent with rational expectations
  4. The earliest political business cycle models assumed that expectations were always rational, whereas the partisan model assumed that expectations were sometimes irrational.
Answer

(C)The myopic, or short-sighted behaviour of voters is inconsistent with rational expectations

QN09. The structural deficit is

  1. Directly attributable to the long-run behaviour of the economy
  2. Not directly attributable to the cyclical behaviour of the economy
  3. The result of permanent decisions policymakers have made about tax rates, the level of government spending, and benefit levels for transfer programs.
  4. Both b and c
Answer

(D)Both b and c

QN10. Assuming a simultaneous deduction in income taxes and transfer payments of $50 billion, then aggregate disposable income will

  1. be higher than before
  2. be lower than before
  3. remain constant
  4. none of the above
Answer

(C)remain constant

QN11. In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy

  1. Increases exports and decreases imports
  2. Decreases exports and increases imports
  3. Encourages foreign capital inflows to the U.S.
  4. Both b and c
Answer

(D)Both b and c

QN12. Physiocrats give utmost importance to

  1. Services
  2. Industry
  3. Agriculture
  4. None of these
Answer

(C)Agriculture

QN13. Which one is not an exception to the Law of Demand?

  1. Normal good
  2. Articles of Distinction
  3. Ignorance
  4. Inferior good
Answer

(A)Normal good

QN14. A fall in the price of a commodity whose demand curve is a rectangular hyperbola causes total expenditure on the commodity to:

  1. Increases
  2. Decrease
  3. Remains unchanged
  4. Any of the above
Answer

(C)Remains unchanged

QN15. The relationship between demand for a commodity and price, ceteris paribus, is:

  1. Negative
  2. Positive
  3. Non-negative
  4. Non-positive
Answer

(A)Negative

QN16. A consumers demand curve can be obtained from:

  1. ICC
  2. Engel curve
  3. Lorence curve
  4. PCC
Answer

(D)PCC

QN17. Unitary elasticity of demand is:

  1. Zero
  2. Equal to one
  3. Greater than 1
  4. Less than 1
Answer

(B)Equal to one

QN18. A usual assumption in real business cycle models is that the economy is populated by a group of identical individuals and the behavior of the group can then be explained in terms of the behavior of one individual, called a _____________________

  1. Maximizing agent
  2. Representative agent
  3. Republican agent
  4. Informative agent
  5. Democratic agent
Answer

(B)Representative agent

QN19. Which of the following statements are correct? According to real business cycle theory,

  1. The desirable monetary policy would appear to be one that results in a slow steady growth in the money supply and, thus stable prices.
  2. There is some role for activist monetary stabilization policy of a Keynesian type
  3. Changes in aggregate demand cannot impact output
  4. Both a and b
  5. Both a and c
Answer

(E)Both a and c

QN20. New Keynesian would agree with all of the following except

  1. Stabilization policy can reduce the severity of business cycles
  2. Wages and prices are sticky
  3. Markets are perfectly competitive
  4. Market equilibrium is often suboptimal
Answer

(C)Markets are perfectly competitive

QN21. An example of negative productivity shocks that could cause recessions is

  1. A hurricane which destroys capital
  2. A decrease in the price of oil
  3. Reductions in defense spending
  4. All of the above
  5. Both a and b
Answer

(A)A hurricane which destroys capital

QN22. In the real business cycle theory during a period when output is falling

  1. Workers are voluntary giving up their jobs
  2. The quantity supplied of labor is falling
  3. All of the above
  4. None of the above
Answer

(D)None of the above

QN23. Which of the following statements are correct

  1. Real business cycle theorists remain convinced that the business cycle can be explained as an equilibrium phenomenon
  2. According to real business cycle theorists fluctuations in output come as optimizing agents respond to real shocks that affect production possibilities
  3. Real business cycle theorists consider policies to prevent fluctuations in output unnecessary
  4. Both a and b
  5. All of the above
Answer

(E)All of the above

QN24. The first Nobel prize winner for Economics was

  1. Hicks
  2. Myrdal
  3. Samuelson
  4. Turbergen
Answer

(D)Turbergen

QN25. The equity of Reserve Bank of India in National Housing Bank is:

  1. 49%
  2. 51%
  3. 71%
  4. 100%
Answer

(D)100%

QN26. Who gave the first scientific treatment of general equilibrium analysis

  1. Leon Walras
  2. J.B Say
  3. Edward Chamberlain
  4. K.E Boulding
Answer

(A)Leon Walras

QN27. Which of the following is a better measure of economic development?

  1. National income
  2. Rural consumption
  3. Size of exports
  4. Employment
Answer

(A)National income

QN28. The rational entrepreneur will expand his output and select input combinations which lies on his:

  1. Isoquant line
  2. Ridge line
  3. Isoquant line
  4. Expansion path
Answer

(D)Expansion path

QN29. Direct control refers to:

  1. Trade and exchange controls
  2. Interference with the operation of the market forces
  3. Price and wage controls
  4. All of these
Answer

(D)All of these

QN30. The income consumption curve generally?

  1. Slopes upwards to the right
  2. Slopes downwards to the right
  3. Slopes upwards to the left
  4. Slopes downwards to the left
  5. Represents a horizontal line
Answer

(C)Slopes upwards to the left

QN31. The higher the marginal income tax rate, the

  1. Higher the MPC out of disposable income
  2. Lower the MPC out of disposable income
  3. Highest the autonomous expenditure multiplier
  4. lower the autonomous expenditure multiplier
  5. none of the above
Answer

(D)lower the autonomous expenditure multiplier

QN32. In the simple Keynesian model, if the tax function is given by T=0.15Y and the consumption function is C= 50 + 0.7 YD then a 10-unit ncrease in government spending would increase equilibrium income by

  1. 10 units
  2. 11.2 units
  3. 22.4 units
  4. 30 units
  5. None of these
Answer

(B)11.2 units

QN33. According to the Keynesian model, the optimal fiscal policy is to

  1. Increase cyclical but not structural deficits during a recession
  2. Reduce cyclical and structural deficits during a recession
  3. Increase structural deficits during a recession
  4. Maintain a balanced budget in case of national emergency
Answer

(A)Increase cyclical but not structural deficits during a recession

QN34. During the recession of 2001,

  1. There were a number of proposals for tax increases or spending cuts to stir the economy, but the failed due to worries about their effects on the already large deficit
  2. A series of tax cuts were passed, though the only occurred in late 2001
  3. All the proposed tax and spending cuts were approved in order to motivate the economy and reduce the large deficit
  4. The cyclical deficit increased but the structural deficit remained unchanged
Answer

(B)A series of tax cuts were passed, though the only occurred in late 2001

QN35. The structural deficit is the deficit that

  1. Is composed by of non discretionary spending by the federal government
  2. Results from the economy being below is natural rate of output
  3. Exists when output is at its natural rate of output
  4. Results from temporary tax cuts
Answer

(C)Exists when output is at its natural rate of output

QN36. According to the concept of rational expectations

  1. Budget deficits are irrelevant to output in the short-run
  2. Higher deficits should increase output in the short run if they are expected
  3. Lower deficits can be used to stabilize output during expansions
  4. None of these
Answer

(A)Budget deficits are irrelevant to output in the short-run

QN37. A fall in the price of a commodity leads to

  1. A shift in demand
  2. A fall in demand
  3. A rise in the consumer's real income
  4. A fall in the consumer's real income
Answer

(C)A rise in the consumer's real income

QN38. The horizontal demand curve for a commodity shows that its demand is:

  1. Perfectly elastic
  2. Highly elastic
  3. Perfectly inelastic
  4. Moderately elastic
Answer

(A)Perfectly elastic

QN39. The utility of a commodity is:

  1. Its expected social value
  2. The extent of its practical use
  3. Its relative scarcity
  4. The degree of its fashion
Answer

(C)Its relative scarcity

QN40. Cross elasticity of demand between tea and sugar is:

  1. Positive
  2. Zero
  3. Infinity
  4. Negative
Answer

(D)Negative

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