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Economics-I 2024 MCQs
1 / 20
There are strong theoretical reasons to expect that changes in wealth are responsible for changes in consumption. Nonetheless, one reason that we observe a tight link between consumption and disposable income is:
Despite wealth changes affecting consumption, households generally try to keep consumption steady by smoothing it over time, linking it closely to disposable income.
2 / 20
With perfect income equality the Gini coefficient in a country would be:
A Gini coefficient of 0 represents perfect income equality, while a coefficient closer to 1 indicates higher inequality.
3 / 20
The Keynesian assumption is a convenient analytical short cut and turns out to be a rather accurate description of the reality. What does it assume?
Keynesian analysis often assumes prices are constant in the short run, making output levels more responsive to demand changes.
4 / 20
The labour measure (L) is:
The labor measure (L) represents the actual labor input, calculated by the number of employed workers times their average working hours.
5 / 20
Economic growth measures the:
Economic growth measures the increase in a country’s output of goods and services over time.
6 / 20
Which kind of demand fluctuates the most?
Investment demand is the most volatile part of total demand, as it responds strongly to economic conditions and expectations.
7 / 20
Non-traded goods do not enter measured GDP because:
Non-traded goods, like services produced and consumed domestically, are not part of measured GDP because they lack a market price.
8 / 20
In short-run macroeconomic analysis, demand is often viewed as the driving force. Which component of total demand is often regarded as being independent of economic conditions and thus exogenous in the model?
Government spending is generally considered exogenous in macroeconomic models because it doesn’t directly depend on economic cycles.
9 / 20
What is not a component of the GDP?
The employment rate is not a direct component of GDP, which measures the market value of goods and services.
10 / 20
The optimal capital stock is achieved when the user cost of capital is equal to:
Optimal capital stock is achieved when the cost of using capital equals the marginal benefit it generates, or the marginal product of capital.
11 / 20
The concept of opportunity cost is based upon the principle of:
Opportunity cost arises because of scarcity, which forces individuals and societies to make trade-offs when allocating limited resources.
12 / 20
A supply side vicious circle of poverty suggests that poor nations remain poor because:
A supply-side poverty trap implies that poor countries stay poor due to low savings and investment, limiting economic growth.
13 / 20
The essence of Engel's law is that as family income rise:
Engel's law states that as income increases, the percentage spent on food decreases, though the actual expenditure on food may increase.
14 / 20
Which of the following is an INCORRECT statement about a budget constraint?
Points on a budget constraint do not imply indifference; they merely represent combinations that fully exhaust income.
15 / 20
The aggregate production function for the Solow growth model assumes ___________ returns to scale and _____________marginal productivity of labour and capital.
The Solow model assumes constant returns to scale and diminishing returns in labor and capital productivity.
16 / 20
The accelerator principle states:
The accelerator principle suggests that anticipated growth in output leads firms to increase investment to meet future demand.
17 / 20
When the manufacturer of power looms expands, there are forward linkage effects due to:
Forward linkages occur when an industry's output increases the demand for products further down the supply chain.
18 / 20
It is the _______ interest rate that matters for spending decisions and the _______ interest rate that is relevant when we look at monetary questions.
The real interest rate affects spending decisions, while the nominal rate is relevant in monetary policy contexts.
19 / 20
Which of the following is not typically an element in the structural change that accompanies development?
Structural changes during development typically include a decline in agriculture's GDP share and a rise in manufacturing and urbanization.
20 / 20
A certain amount of goods and services is necessary for a minimum standard of living. This is called:
Basic needs refer to the essential goods and services required for a minimum standard of living.
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