Online MCQ Assignment
This flash card is very useful for Online MCQ Assignment and must study for if you are student of distance learning program for amity, upes, imtcdl, smu or any others university/institute
QN1: Land will be allocated between competing uses so that ___
A) housing gets priority
B) industry gets priority
C) farming gets priority
D) the equilibrium rental rate equilibrates total demand with supply
Answer
Answer: D) the equilibrium rental rate equilibrates total demand with supply
QN2: Different capital intensity in different industries is mainly explained by ___ and ___
A) wage differentials, skill levels
B) technology, the ease of factor substitution
C) government grants, international competition
D) patents, skill shortages
Answer
Answer: B) technology, the ease of factor substitution
QN3: The functional distribution of income shows how national income is divided between
A) employees
B) the population
C) the factors of production
D) the working population
Answer
Answer: C) the factors of production
QN4: A major cause of income inequality in the UK is trade union power
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN5: The transfer earnings of a factor are the payments received in excess of its opportunity cost
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN6: In the insurance industry, high-risk customers are more likely to take out insurance. This is an example of
A) moral hazard
B) risk aversion
C) adverse selection
D) a poor gamble
Answer
Answer: C) adverse selection
QN7: Moral hazard means that the act of insuring ___that the desired outcome will occur
A) reduces the likelihood
B) increases the likelihood
C) guarantees
D) none of the above
Answer
Answer: B) increases the likelihood
QN8: An allocation is Pareto-efficient if no reallocation of resources would make some people ___ without making others ___
A) worse off, worse off
B) better off, better off
C) better off, worse off
D) equal, unequal
Answer
Answer: C) better off, worse off
QN9: A competitive equilibrium is Pareto-efficient
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN10: We cannot say whether one allocation of resources is better than another allocation because
A) some people cant count
B) some people may not be permanent residents
C) not all economic activity is legal
D) we cant make value judgements to compare different people’s welfare
Answer
Answer: D) we cant make value judgements to compare different people’s welfare
QN11: A competitive equilibrium is Pareto-efficient because
A) producers are price takers
B) consumers and producers face the same prices
C) marginal costs and benefits are equal
D) prices equal marginal cost and benefit
E) all of the above
Answer
Answer: E) all of the above
QN12: The allocation of resources is not efficient if ___
A) the marginal cost of production does not equal society’s marginal benefit
B) the distribution is inequitable
C) economic growth is low
D) unemployment is high
Answer
Answer: A) the marginal cost of production does not equal society’s marginal benefit
QN13: If my neighbour burns garden waste causing my house to fill with smoke this is an example of ___
A) a production externality
B) a second-best solution
C) transaction costs
D) a consumption externality
Answer
Answer: D) a consumption externality
QN14: Externalities arise because there is a divergence between ___ and ___
A) private costs, private benefits
B) private costs, social costs or benefits
C) social costs, social benefit
D) insiders, outsiders
Answer
Answer: B) private costs, social costs or benefits
QN15: Market failure may arise because of
A) imperfect competition
B) taxation
C) externalities
D) missing markets
E) all of the above
Answer
Answer: E) all of the above
QN16: Markets sometimes fail to exist because of
A) externalities
B) the free-rider problem
C) poor transport
D) a and b
E) a and c
Answer
Answer: D) a and b
QN17: A good example of a public good is ___
A) public transport
B) the national health service
C) national defence
D) rail transport
Answer
Answer: C) national defence
QN18: If the consumption of a good by one person does not reduce the quantity available by others and nobody can be easily excluded from consumption, we are referring to a
A) private good
B) merit good
C) public good
D) abundant good
Answer
Answer: C) public good
QN19: Satellite television subscription and television detection devices are ways in which broadcasting companies address the ___ problem
A) externality
B) market imperfection
C) deadweight burden
D) free-rider
Answer
Answer: D) free-rider
QN20: Taxes to offset externalities are distortionary
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN21: Except for taxes to offset ___, taxes are ___
A) imperfect competition, popular
B) externalities, distortionary
C) inequality, a first best option
D) poor health, unnecessary
Answer
Answer: B) externalities, distortionary
QN22: Taxes create a wedge between the sales price and purchase price that prevents the price system equating ___ and ___
A) marginal costs, marginal benefits
B) demand, supply
C) marginal cost, marginal revenue
D) marginal cost, average cost
Answer
Answer: A) marginal costs, marginal benefits
QN23: The effect of a tax to offset a negative externality will be to ___ price and ___ quantity
A) reduce, reduce
B) increase, increase
C) increase, reduce
D) reduce, increase
Answer
Answer: C) increase, reduce
QN24: The social costs of monopoly power arises because ___
A) marginal cost is set equal to marginal revenue
B) price is less than marginal cost
C) marginal consumer benefit is less than marginal revenue
D) there is too little output at too high a cost
Answer
Answer: D) there is too little output at too high a cost
QN25: The Competition Commission in the UK starts with the presumption that monopoly is bad
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN26: If two firms doing the same thing in the same industry join together, this is known as a ___
A) vertical merger
B) horizontal merger
C) conglomerate merger
D) hostile takeover
Answer
Answer: B) horizontal merger
QN27: In the UK mergers can be referred to the Competition Commission if they create a firm with ___ of the market
A) 15%
B) 20%
C) 25%
D) 30%
Answer
Answer: C) 25%
QN28: The problem posed by a natural monopoly is that it faces a ___ . This means that ___
A) increasing average cost curve, marginal cost lies above average cost
B) increasing average cost curve, marginal cost lies below average cost
C) decreasing average cost curve, marginal cost lies above average cost
D) decreasing average cost curve, marginal cost lies below average cost
Answer
Answer: D) decreasing average cost curve, marginal cost lies below average cost
QN29: The key issues of macroeconomics are
A) unemployment
B) inflation
C) economic growth
D) all of the above
Answer
Answer: D) all of the above
QN30: In an economy, measuring (1)total value added, (2)total spending on final goods and (3)total factor earnings gives the result that
A) 3>2>1
B) 3=2=1
C) 3<2<1
D) any measure can be larger or smaller than any other
Answer
Answer: B) 3=2=1
QN31: In the circular flow of income, saving is an injection and investment is a leakage
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN32: In the economy when a steel producer sells steel to car producer, it is regarded as ___
A) a final good
B) an intermediate good
C) an injection
D) a leakage
Answer
Answer: B) an intermediate good
QN33: Leakages from the circular flow are ___, ___ and ___
A) investment, savings, government expenditure
B) savings, taxes net of subsidies, imports
C) consumption, investment, government expenditure
D) consumption, taxes, imports
Answer
Answer: B) savings, taxes net of subsidies, imports
QN34: Injections into the circular flow are ___, ___ and ___
A) consumption, investment, exports
B) investment, exports, transfer payments
C) investment, government expenditure, exports
D) taxes, exports, transfer payments
Answer
Answer: C) investment, government expenditure, exports
QN35: In the circular flow we would expect leakages to ___ injections
A) equal
B) be less than
C) be greater than
D) be less or greater than
Answer
Answer: A) equal
QN36: Gross national product adjusts GDP for net property income from abroad
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN37: Nominal GNP measures income ___
A) At the present time
B) Corrected for tax changes
C) Corrected for changes in interest rates
D) At current prices
Answer
Answer: D) At current prices
QN38: Real GNP measures income ___
A) including non-market activities
B) adjusted for inflation
C) including externalities
D) including tax evasion
Answer
Answer: B) adjusted for inflation
QN39: Real GNP is a crude measure of national welfare because it excludes
A) consumption
B) investment
C) exports
D) work in the home
Answer
Answer: D) work in the home
QN40: When we refer to the hidden economy we mean unrecorded income owing to ___
A) tax evasion
B) poor statistics
C) the lags between statistical collection and publication
D) smuggling
Answer
Answer: A) tax evasion
QN41: In a macroeconomic model without foreign trade or a government, aggregate demand is the sum of
A) personal saving and private investment
B) personal saving and personal consumption
C) personal consumption and private investment
D) none of the above
Answer
Answer: C) personal consumption and private investment
QN42: The sum of the MPS and MPC is 1
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN43: A linear consumption function with a positive slope less than one means that if income increases, consumption will ___
A) fall
B) not change
C) fluctuate
D) increase
Answer
Answer: D) increase
QN44: Short-run equilibrium output means that aggregate demand ___ actual output
A) is less than
B) equals
C) is greater than
D) fluctuates around
Answer
Answer: B) equals
QN45: If desired spending in the economy exceeds income we would expect ___
A) households to save more
B) firms to produce less
C) firms to produce more
D) the MPC to change
Answer
Answer: C) firms to produce more
QN46: In equilibrium savings exceed investment
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN47: When investment is assumed to autonomous the slope of the AD schedule is determined by the ___
A) marginal propensity to invest
B) disposable incomes
C) marginal propensity to consume
D) average propensity to consume
Answer
Answer: C) marginal propensity to consume
QN48: The multiplier tells us how much ___ changes after a shift in ___
A) consumption, income
B) investment, output
C) savings, investment
D) output, aggregate demand
Answer
Answer: D) output, aggregate demand
QN49: The multiplier is calculated as
A) 1/(1 – MPC)
B) 1/MPS
C) 1/MPC
D) a or b
Answer
Answer: D) a or b
QN50: If the MPC is 0.5, the multiplier is ___
A) 2
B) 1/2
C) 0.2
D) 20
Answer
Answer: A) 2
QN51: If as a result of households’ wish to save more, there is a change in equilibrium income and no change in equilibrium saving, this is an example of ___
A) market imperfection
B) the law of diminishing returns
C) the paradox of thrift
D) market failure
Answer
Answer: C) the paradox of thrift
QN52: Aggregate demand without a foreign sector is the sum of
A) C + I
B) C + G
C) I + G
D) C + I + G
Answer
Answer: D) C + I + G
QN53: If the government increases spending and raises taxes by just enough to finance this increase it will ___
A) leave output unchanged
B) increase output
C) reduce output
D) increase the MPC
Answer
Answer: B) increase output
QN54: Starting from a balanced budget, for a given tax rate, an increase in income will cause the government budget to
A) move into surplus
B) move into deficit
C) remain unchanged
Answer
Answer: A) move into surplus
QN55: For given government spending and taxation, the government budget deficit will grow in ___ and decline in ___
A) booms, booms
B) recession, recession
C) booms, recessions
D) recessions, booms
Answer
Answer: D) recessions, booms
QN56: The government budget is a good indicator of fiscal stance
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN57: Aggregate demand in an economy trading internationally with a government sector can be written as ___
A) AD = C + I
B) AD = C + I + G
C) AD = C + I + G + X + Z
D) AD + C + I + G + X – Z
Answer
Answer: D) AD + C + I + G + X – Z
QN58: The total multiplier for the economy will reflect ___
A) MPC and MPT
B) MPT and MPZ
C) MPC and MPZ
D) MPC, MPT and MPZ
Answer
Answer: D) MPC, MPT and MPZ
QN59: When the level of income ___ there will be a tendency for the trade balance to improve as imports ___
A) increases, increase
B) falls, increase
C) falls, fall
D) increase, fall
Answer
Answer: C) falls, fall
QN60: When an open economy is in equilibrium it means that the trade deficit is zero
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN61: In an open economy leakages to imports ___ the value of the multiplier
A) reduce
B) increase
C) do not change
Answer
Answer: A) reduce
QN62: Higher export demand ___ output and a higher MPZ ___ output
A) reduces, reduces
B) reduces, increases
C) increases, reduces
D) increases, increases
Answer
Answer: C) increases, reduces
QN63: Money has 3 main functions, they are, ___, ___ and ___
A) IOU, inflation hedge, store of value
B) Medium of exchange, inflation hedge, store of value
C) Medium of exchange, unit of account, IOU
D) Medium of exchange, unit of account, store of value
Answer
Answer: D) Medium of exchange, unit of account, store of value
QN64: The primary function of a bank is to
A) Control the money supply
B) Provide notes and coins for trade
C) Make a profit
D) Provide a cheque clearing system
Answer
Answer: C) Make a profit
QN65: Banks create money by
A) printing it
B) issuing debit cards
C) accepting cheques
D) lending out part of their deposits
Answer
Answer: D) lending out part of their deposits
QN66: The size of the money multiplier is determined by the marginal propensity to consume
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN67: The money supply is ___
A) the Bank of England Issue Department
B) money + bank cards +credit cards
C) Cheques + money + bank cards + credit cards
D) Currency in circulation plus bank deposits
Answer
Answer: D) Currency in circulation plus bank deposits
QN68: If banks and the private sector decide to hold less cash the money multiplier will be ___
A) unchanged
B) larger
C) smaller
D) unstable
Answer
Answer: B) larger
QN69: Three variables affect the demand for money; they are ___, ___ and ___
A) bank opening hours, the proportion of weekly paid employees, interest rates
B) the price level, interest rates, real income
C) the time of year, bank opening hours, the price level
D) the proportion of weekly paid employees, the time of year, real income
Answer
Answer: B) the price level, interest rates, real income
QN70: If I keep some money available in case I see a bargain, this is an example of ___
A) asset demand for money
B) transactions demand for money
C) token demand for money
D) precautionary demand for money
Answer
Answer: D) precautionary demand for money
QN71: An increase in the price level will likely increase the demand for nominal money
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN72: When interest rate rise, other things equal, we can expect the quantity of real money holdings to ___
A) fall
B) increase
C) not change
Answer
Answer: A) fall
QN73: When real income increases, other things equal, we can expect the demand for real money holdings to ___
A) fall
B) not change
C) increase
Answer
Answer: C) increase
QN74: M4 is a ___ measure of money and includes deposits at both ___ and ___
A) narrow, banks, building societies
B) wide, banks, insurance companies
C) narrow, banks, insurance companies
D) wide, banks, building societies
Answer
Answer: D) wide, banks, building societies
QN75: The monetary base is ___ and ___
A) bank deposits, building society deposits
B) currency in circulation, banks’ cash reserves
C) retail sight deposits, building society deposits
D) retail deposits, wholesale deposits
Answer
Answer: B) currency in circulation, banks’ cash reserves
QN76: If the central bank buys financial securities in the open market to increase the monetary base, this is an example of ___
A) lender of last resort
B) financial intermediation
C) open market operations
D) financial regulation
Answer
Answer: C) open market operations
QN77: Equilibrium in the money market will change if there is
A) a change in the real money supply
B) a change in real income
C) a change in competition in the banking industry
D) any of the above
Answer
Answer: D) any of the above
QN78: The money supply is controlled by using open market operations to determine the money multiplier and by using reserve requirements and the discount rate to determine the monetary base
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN79: Central banks prefer to fix the ___and accept the resulting ___
A) demand for money, interest rate
B) interest rate, equilibrium money supply
C) demand for money, equilibrium money supply
D) interest rate, demand for money
Answer
Answer: B) interest rate, equilibrium money supply
QN80: One of the transmission mechanisms of monetary policy is through consumer demand. When interest rates ___ household wealth ___ and consumption ___
A) rise, increases, increases
B) rise, falls, increases
C) rise, increases, falls
D) rise, falls, falls
Answer
Answer: D) rise, falls, falls
QN81: A reduction in interest rates, causes an increase in the monetary base that results in an ___ in the availability of consumer credit and a ___ in the cost of consumer credit
A) reduction, increase
B) reduction, reduction
C) increase, reduction
D) increase, increase
Answer
Answer: C) increase, reduction
QN82: A fall in investment demand can result from
A) higher interest rates
B) lower expected future profits
C) more expensive capital goods
D) all of the above
Answer
Answer: D) all of the above
QN83: All of the following are types of monetary policy except
A) a nominal money stock target
B) a balanced budget
C) an inflation target
D) the pursuit of a target real interest rate
Answer
Answer: B) a balanced budget
QN84: An increase in government spending will stimulate private spending by causing a reduction in interest rates
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN85: The classical model of macroeconomics assumes
A) wages and prices are sticky
B) wages and prices are flexible
C) the economy may operate below full capacity
D) the economy is always at full capacity
E) a and c
F) b and d
Answer
Answer: F) b and d
QN86: The AD schedule indicates that ___ inflation is associated with ___ output
A) higher, lower
B) higher, higher
C) lower, lower
D) zero, zero
Answer
Answer: A) higher, lower
QN87: In the classical model the AS schedule is vertical
A) TRUE
B) FALSE
Answer
Answer: A) TRUE
QN88: If a person thinks they are better off after a 10% wage increase, and all prices have risen 10%, then they are experiencing ___
A) inflation
B) a supply shock
C) crowding out
D) inflation illusion
Answer
Answer: D) inflation illusion
QN89: In the classical model, potential output can not be increased by
A) monetary growth
B) better technology
C) more capital
D) higher labour supply
Answer
Answer: A) monetary growth
QN90: The equilibrium inflation rate is determined by the intersection of ___ and ___
A) demand, supply
B) IS, LM
C) AD, AS
D) Labour demand, labour supply
Answer
Answer: C) AD, AS
QN91: At the intersection of AD and AS equilibrium is achieved in
A) the goods market
B) the money market
C) the labour market
D) all of the above
Answer
Answer: D) all of the above
QN92: Fiscal expansion in the classical model can increase real output
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN93: The Keynesian model is a good guide to ___ behaviour and the classical model describes behaviour in ___
A) long run, short run
B) flexible, imperfect markets
C) short-term, long run
D) long run, imperfect markets
Answer
Answer: C) short-term, long run
QN94: Temporary supply shocks alter potential output
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN95: Expansionary fiscal policy in the classical model will cause aggregate demand to ___ potential output
A) exceed
B) fall below
C) fluctuate around
D) remain equal to
Answer
Answer: D) remain equal to
QN96: In the event of an increase in the international price of oil that encouraged the central bank to accept lower real interest rates, inflation would most likely ___
A) fall
B) increase
C) remain the same
D) fluctuate
Answer
Answer: B) increase
QN97: The quantity theory of money says that changes in ___ lead to equivalent changes in ___, but have no effect on ___
A) prices, wages, output and employment
B) output, prices, employment
C) nominal money, the price level, output and employment
D) nominal money, output, prices
Answer
Answer: C) nominal money, the price level, output and employment
QN98: Monetarists believe that a reduction in ___can be achieved by reducing ___
A) unemployment, prices
B) inflation, wages
C) unemployment, wages
D) inflation, the quantity of nominal money
Answer
Answer: D) inflation, the quantity of nominal money
QN99: Faster nominal money growth leads to either higher inflation or higher nominal interest rates, but not both
A) TRUE
B) FALSE
Answer
Answer: B) FALSE
QN100: During periods of rising inflation and rising interest rates we expect the demand for real cash to
A) rise
B) fall
C) not change
D) fluctuate
Answer
Answer: A) rise
