UNIT 5

AGGREGATE SUPPLY AND THE ROLE OF MONEY

1. Macroeconomics is
(a) Behaviour of individual economic units
(b) Price theory of goods
(c) Allocation of resources
(d) Aggregates of the whole economy.
Answer: (A)

2. Micro economics is
(a) Individual economic units
(b) Price determination of goods
(c) Equilibrium of a consumer and producer
(d) all of the above.
Answer: (D)

3. Production is
(a) Creating goods and services
(b) Using up of goods and services for direct satisfaction
(c) addition to the existing capital stock of an economy.
(d) Goods resold in the market.
Answer: (A)

4. Consumption is a
(a) creating goods, a service
(b) addition to the existing capital stock of an economy
(c) utilising gods and services for direct satisfaction.
(d) goods resold in the market.
Answer: (C)
5. Capital formation
(a) surplus of production over consumption
(b) goods resold in the market
(c) creating goods and services
(d) addition to the existing capital stock of an economy.
Answer: (A&D)

6. Resources of an economy
(a) Land
(b) Labour
(c) Capital
(d) Entrepreneurship
(e) All of the above.
Answer: (E)

7. Economic problem occurs due to

(a) Unlimited wants 103
(b) Unlimited resources
(c) Limited wants
(d) Alternative use of resources.
Answer: (A, D)

8. Problem of Allocation of resources

(a) What to produce
(b) Problem of economic growth
(c) Problem of optimum utilisation of resources.
Answer: (A)
9. Shape of PPC is
(a) Concave to the origin
(b) Course to the origin
(c) Upward rising from origin
(d) all of the above
Answer: (A)

10. Increasing MOC/MRT implies

(a) Concavity of PPC
(b) Cons city of PPC
(c) Straight line PPC
(d) None of the above
Answer: (A)

11. Reason for increasing MOC/MRT

(a) Law of diminishing returns/increasing costs
(b) Law of variable proportions
(c) Law of increasing returns / diminishing costs.
(d) None of the above.
Answer: (A)

12. Massive unemployment is indicated by

(a) Left ward shift in PPC
(b) rightward shift in PPC
(c) under-utilisation of resources by a point inside PPC
(d) Over-utilisation of resources.
Answer: (C)
13.According to Keynes what causes changes in inducement to invest by
entrepreneurs?
A. MPC and MEI
B. MEC and MPS
C. MEC and rate of interest
D. MPC and rate of interest
Answer: (C)

14.The formula for calculating investment multiplier is

A. ∆ Y
B. ∆Y+∆ I ∆I
C.∆I
D. ∆ C+ ∆I ∆Y
Answer: (A)

15. Who is considered as the father of modern macroeconomics?

A. Ragner Frisch
B. Adam smith
C. J M Keynes
D. Milton Friedman
Answer: (C)