SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)

Subject: Macro Economics

Sample Questions:
Section I: Subjective Questions

1. What are the resource categories of aggregate supply?

2. What are reasons for Business Cycle Fluctuation?

3. Discuss the importance of money supply in economic development.

4. What is GNP and GDP? Explain with example.

5. What is the significance of Deficit Budget Policy?

6. Explain Friedman's Approach of demand for nominal money.

7. Discuss the concept of 'National Income'.

8. Explain the assumption of 'Flexible Prices' in classical economics.

Section II: Objective Questions

Multiple Choice Single Response

1. Debtors find it more and more convenient to pay off their debts in this phase of
business cycle

1] Prosperity

2] Recession

3] Depression

4] Recovery

2. The equation of exchange, MV = PQ, suggests that if we assume that velocity is

constant and the economy is at full employment or moving toward it quickly, then
in the short run

1] An increase in the money supply will cause interest rates to fall and spending to
increase

2] An increase in government spending will increase real GDP

 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

3] An increase in taxes will cause real GDP to decrease

4] An increase in the money supply will cause a proportionate increase in the price
level

3. During September 2008, the average housing prices in the USA had started
declining and the borrowers were unable to refinance in order to avoid higher
payments linked with rising interest rates and became defaulters. This is referred to
as

1] Global recession

2] Housing bubble burst

3] Conditional recession

4] Stagflation

4. An increase in autonomous expenditure shifts the AE curve

1] Upward and leaves its slope unchanged

2] Upward and makes it steeper

3] Upward and makes it flatter

4] Downward and makes it steeper

5. Money held to take advantage of future financial opportunities is the:

1] Transactions demand for money

2] Speculative demand for money

3] Precautionary demand for money

4] Portfolio demand for money

6. A decrease in the money supply will typically:

1] Raise interest rates and increase aggregate demand

2] Raise interest rates and decrease aggregate demand

3] Reduce interest rates and increase aggregate demand

4] Reduce interest rates and decrease aggregate demand

7. Which of the following would not be an example of contractionary fiscal policy?

 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

1] Decreasing money spent on social programmes

2] Increasing income taxes

3] Increasing money spent to pay for government projects

4] Doing nothing with a temporary budget surplus

8. The IMF helps countries strengthen their capacity to design and implement proper

1] Financial policies

2] Socio-economic policies

3] Economic policies only

4] Financial management policies

9. Measurement of national income in India was done using

1] Both income and output methods

2] Income method

3] Output method

4] Expenditure method

10. The aggregate expenditure curve shows the relationship between aggregate planned
expenditure and

1] Government purchases

2] Real GDP

3] The interest rate

4] The price level

Multiple Choice Multiple Response

11. All over the world central banks perform the following specialised function
1] Conducting banking operations for the government
2] Managing payment and settlement systems
3] Supervising and regulating banking institutions
4] Managing fiscal deficit
12. Some of the characteristics of money are

1] Durable

2] Divisible
 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

3] Non - transportable

4] Non-counterfeitable

13. Fluctuations in the economic activities cause not only harm to business but also
misery to human beings by creating

1] Unemployment

2] Poverty

3] Employment

4] Prosperity

14. The 3 specific categories of investment by business sector are

1] Fixed structures

2] Equipment

3] Inventories

4] Government spending

15. The monetarist theory was developed by Karl Brunner and Allan H. Meltzer (1968,
1972) and they broadly assumed three distinct assets

1] base money

2] bonds

3] real capital

4] insurance

16. According to Economists Ackley and Johnson inflation means , which is

1] Phenomena of rising employment

2] Phenomena of rising government control

3] A phenomena of rising prices

4] A phenomena of rising unemployment

17. The challenge for economic planners is to minimise the instability by encouraging
the economyâs ability to raise living standards through

1] higher productivity
 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

2] efficiency

3] employment

4] unemployment

18. What are the two essential features of the Phillips Curve?

1] There is a¿short-term trade-off

2] The trade off is between unemployment and inflation

3] There is no trade off in unemployment & Inflation

4] There is long-term trade off

Fill in the Blanks

19. Central banks adopted ______ as backing for extension of credit to government.

1] Government paper

2] Fixed deposits

3] Gold

4] Exchange reserves

20. NNP is called national income ______ .

1] At market prices

2] At factor cost

3] Both at market prices and factor cost

4] Neither at market prices nor at factor cost

21. The market price of a good includes indirect taxes such as ______ .

1] Sales tax and excise tax

2] Only sales tax

3] Only excise tax

4] Neither sales tax nor excise tax

22. GNP is the total market value of all final goods and services produced in a year
______ .
 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

1] Plus net income from abroad

2] Plus net expenses from abroad

3] Plus net savings from abroad

4] Plus net investment from abroad

23. Kydland and Prescott showed that the ______ rules affects the structure of the
policymakerâs model in the economy.

1] Choice of policy

2] Choice of article

3] Choice of service

4] Choice of personal

24. Graphically, equilibrium exists where the total expenditures function (C + I) crosses
the ______ .

1] 45 degree line

2] Aggregate expenditure line

3] Aggregate consumption line

4] Aggregate investment line

25. Keynesians would advocate a decrease in the money supply (contractionary

monetary policy), which would ______ interest rates, decrease spending, decrease
AD, and decrease prices and real output.

1] Increase

2] Decrease

3] Nullify

4] Not affect

26. For Keynesian economists, ______ are sticky in the short run.

1] Prices

2] Demand

3] Supply
 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

4] Interest rate

27. Fiat money is currency, which is declared by the government to be ______ tender.

1] unauthorised

2] illegal

3] legal

4] illegitimate

28. Ceteris paribus, ______ net exports would decrease aggregate demand.

1] negative

2] neutral

3] positive

4] zero

State True or False

29. A lower price level, other things being equal, will lead to increased real wealth and
an increase in the quantity of RGDP demanded.

30. The Keynesian Theory is basically in favour of the classical analysis and classical
belief in the automatic adjustments in a capitalist economy leading to full
employment

31. Governments seek ways to reduce unnecessary frictional unemployment.

32. It is a major policy objective for the central banks to ensure maintenance of a stable
price level

33. As per Keynes theory, demand of money arises to satisfy luxury needs

34. An increase in production cost increases aggregate supply and shifts the SRAS
rightward.

35. The aggregate demand (AD) curve indicates the quantities of nominal GDP
demanded at different price levels.

36. In the short run, an increase in investment expenditure of $1 billion increases

equilibrium GDP by more than $1 billion.

37. If the price level falls, input prices, producers profits, and real output will fall in the
short run.
 SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

38. Along the short-run aggregate supply curve, we assume that wages and other input
prices have time to adjust.

Match the Following

39. 1] Currently, output and income 1] National income of the country

methods are used by the CSO to
estimate
2] The output method is used for 2] Commodity producing sectors
agriculture and manufacturing sectors,
i.e.,
3] Income method is used for the service 3] Trade, commerce, transport and
sectors including government services
4] National income is estimated at 4] Both constant and current prices

5] Both market price and factor cost

6] The goods producing sectors

40. 1] Open market operations 1] Purchase or sale of securities

2] Cash reserves 2] Deposits held in reserve in cash with
RBI
3] Repo rate 3] Rate at which liquidity is injected
4] Reverse repo rate 4] Rate at which liquidity is absorbed

5] Rate at which bond paper is injected

6] Holding of gold

41. 1] NDP differs from NNP due to
2] If the net income from abroad is
positive
3] If the net income from abroad is
negative
4] NDP is also calculated either
1] The net income from abroad
2] NDP will be less than NNP
3] NDP will be greater than NNP
4] At market price or at factor cost

5] The net factor income from abroad

6] Only at market price

42. 1] Ensuring credit to productive sectors 1] Developmental role

of the economy
2] Design, production and circulation of
currency
3] Custody of the country’s foreign
exchange reserves
4] Risk-based supervision of banks
2] Currency management
3] Management of foreign exchange
reserves
4] Regulation and supervision of banks

5] Social role
SYMBIOSIS CENTRE FOR DISTANCE LEARNING (SCDL)
Subject: Macro Economics

6] Bond management