Rise University Campus

Examination July 2021 – 2nd Semester (Mid Term)

(Objective Type Paper)
Total Marks: 50 Time: 01 Hour

Course Title: Macro Economics

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Date: Total Marks: 50
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1. * The aggregate demand curve would shift to the right if: (a) aggregate demand is less than the full employment level of
(a) government taxes increase income
(b) net exports increase (b) injections exceed withdrawals at the full employment level of
(c) government spending decreases income
(d) the nominal money supply decreases (c) the government has a budget surplus
2. * Which of the following measures is NOT likely to boost a (d) none of the above
country’s rate of economic growth? 9. * Which of the following policies help in increasing economic
(a) Tax cuts growth?
(b) Tax rebates (a) Increase in taxes
(c) Reduction in subsidies (b) Increase in government spending
(d) Increase in government spending (c) Reduction in subsidies
3. * Which of the following are regarded as withdrawals from the (d) Wage freezes
circular flow of income? 10. * If a government were to pursue an expansionary monetary
(a) saving and taxation policy it would:
(b) export and import (a) raise interest rates and sell securities
(c) investment and saving (b) lower interest rates and sell securities
(d) Government spending and borrowing (c) raise interest rates and buy securities
4. * Which of the following would decrease aggregate demand? (d) lower interest rates and buy securities
(a) increased investment 11. * Increase in Cash Reserve Ratio would:
(b) increase in export revenue (a) Decrease prices
(c) increased taxation (b) Reduce inflation
(d) increased consumption (c) Control lending
5. * To counteract a recession, the Central Bank should: (d) All the above
(a) raise the reserve requirement and the discount rate 12. * Which of the following is a tool of expansionary policy?
(b) sell securities on the open market and lower the discount rate (a) Increase taxes
(c) buy securities on the open market and raise the discount rate (b) Reduce subsidies
(d) buy securities on the open market and lower the discount (c) Allow tax rebates
rate (d) Freeze wages
6. * The aggregate supply curve: 13. * While pursuing contractionary monetary policy, the
(a) is the sum of the individual supply curves in the economy government would:
(b) is a market supply curve (a) raise interest rates and sell securities
(c) embodies the same logic that lies behind an individual firm’s (b) lower interest rates and sell securities
supply curve (c) raise interest rates and buy securities
(d) none of the above (d) lower interest rates and buy securities
7. * Inflation will increase when: 14. * Long Run Aggregate Supply (LRAS) curve is a vertical line
(a) aggregate demand increases faster than aggregate supply. because it is:
(b) aggregate supply increases faster than aggregate demand. (a) dependent on price level and signifies the upper limit of the
capacity in the economy
(c) aggregate demand falls.
(b) dependent on price level and signifies the lower limit of the
(d) both b and c.
capacity in the economy
8. * A deflationary gap exists in an economy when:

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 Rise University Campus
Examination July 2021 – 2nd Semester (Mid Term)
(Objective Type Paper)
Total Marks: 50 Time: 01 Hour

(c) independent of price level and signifies the upper limit of the 23. * GDP is equal to:
capacity in the economy (a) the market value of all final goods and services produced
(d) independent of price level and signifies the lower limit of the during the course of the year.
capacity in the economy (b) the sum of the incomes earned by suppliers of resources in
15. * Which of the following is an example of contractionary the economy.
monetary policy? (c) the sum of value-added at all stages of production.
(a) A decrease in spending on infrastructure (d) all of the above.
(b) An increase in direct taxes 24. * Which of the following statement is correct?
(c) An increase in interest rates (a) Disposable Income is equal to consumption plus saving.
(d) A decrease in reserve to be maintained with central bank (b) Disposable Income is equal to personal income less personal
16. * Which of the following is an objective of fiscal policy? taxes.
(a) Zero inflation (c) Disposable Income is either spent on consumer goods and
(b) Reduced money supply services or saved.
(c) Low exchange rates (d) All of the above.
(d) Stable economic growth 25. * Consider the following with reference to circular flow of
17. * Which of the following measures is NOT likely to boost a national income:
country’s rate of economic growth? (a) subsidy on agricultural produce
(a) Tax cuts (b) import of capital goods
(b) Tax rebates (c) export of consumer goods
(c) Reduction in subsidies (d) levy of withholding tax
(d) Increase in government spending Which of the above represent injections into the circular flow of
18. * Along with the benefits, certain costs are also associated national income:
with economic growth. These include: (a) (A) and (B) only
(a) high unemployment (b) (B) and (D) only
(b) decrease in tax revenue (c) (A) and (C) only
(c) inflation (d) (C) and (D) only
(d) stagflation 26. * Which of the following constitute(s) injection into the
19. * Aggregate supply increases due to increase in: circular flow of income?
(a) labour productivity (a) Investments by businesses
(b) consumer spending (b) Government expenditures on goods and services
(c) wage rate (c) The value of exports
(d) interest rates (d) All of the above
20. * The GDP deflator is the: 27. * The difference between GDP and GNP consists of:
(a) Ratio of nominal GDP to real GDP multiplied by 100 (a) Consumption of fixed capital
(b) Ratio of real GDP to nominal GDP multiplied by 100 (b) Indirect business taxes
(c) Difference between real GDP and nominal GDP multiplied by (c) Public and private transfer payments
100 (d) Net foreign factor income
(d) Difference between nominal GDP and real GDP multiplied by 28. * To transform GDP from market prices to basic prices it is
100 necessary to:
21. * The quantities of domestic goods given up to obtain a unit of (a) Exclude imports
imported goods is called: (b) Subtract taxes and subsidies
(a) Balance of trade (c) Subtract taxes and add subsidies
(b) Terms of trade (d) Add income from abroad
(c) Substitution effect 29. * Net National Product (NNP) can be arrived at from Gross
(d) Balance of payment National Product (GNP) by:
22. * Which of the following is NOT a determinant factor in the (a) deducting depreciation
rate of growth of a country’s standard of living? (b) adding indirect taxes
(a) Lowering of retirement age (c) deducting indirect taxes and adding depreciation
(b) Capital investment (d) adding depreciation
(c) Technological improvements 30. * Which of the following represents a withdrawal from the
(d) Upgrading of educational standards at the university level circular flow of national income?

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 Rise University Campus
Examination July 2021 – 2nd Semester (Mid Term)
(Objective Type Paper)
Total Marks: 50 Time: 01 Hour

(a) A rise in consumption 36. ** Which one of the following would cause a fall in the level of
(b) A deficit on the balance of trade aggregate demand in the economy.
(c) A surplus on the balance of trade (a) a decrease in the level of imports
(d) A rise in public investment (b) a fall in the propensity In save
31. * Assume that in 2017 the nominal gross domestic product of (c) a decrease in government expenditure
a country is Rs. 500 billion and the price index is 200. If the (d) a decrease in the level of income lax
price index was 150 in 2010 what would be the real gross 37. ** Which of the following is not part of aggregate demand?
domestic product of the country in 2017 computed in terms of (a) Investment
2010 prices? (b) Govt. Spending
(a) Rs. 125 billion (c) net exports
(b) Rs. 166.67 billion (d) Taxes
(c) Rs. 375 billion 38. ** Net exports are always:
(d) Rs. 666.7 billion (a) Positive
32. * Consider the following data for a country: (b) Negative
Rs. in billion (c) Balance
Consumer expenditure 250 (d) None of these
Government expenditure 500 39. ** Per Capita Income is calculated as:
Imports 100 (a) N.I+Population
Taxes 20 (b) N.I.*Population
Depreciation 5 (c) N.I/Population
Based on the above data, the aggregate demand for the economy (d) Both (a) and (c)
would be: 40. ** Gross Domestic Product equals:
(a) Rs. 625 billion (a) GNP – NFI
(b) Rs. 850 billion (b) GNP + NFI
(c) Rs. 650 billion (c) GNP – indirect taxes
(d) Rs. 825 billion (d) Both (a) and (c)
33. ** Actual GDP may exceed potential GDP for a short period of 41. ** Disposable income is:
time when: (a) the same as personal income
(a) the unemployment rate is high (b) income that is used only for consumption
(b) plants run extra shifts that ordinarily are not scheduled. (c) Personal income remaining after income taxes
(c) plants are shut down to remove old equipment and install (d) exclusive of social security payments or welfare.
new equipment
42. ** The difference between GNP and GDP is:
(d) any or all of the above occur.
(a) net factor payments to foreigners
34. ** When economists speak of investment, they are speaking
(b) indirect business taxes paid to all levels of government
of:
(c) net exports of goods and services.
(a) The part of GNP used by households for current use.
(d) capital consumption allowances.
(b) The part of GNP, past and present, that has been set aside to
add to productive capacity. 43. ** A country that makes large net income payments to
investors in another country is likely to:
(c) The part of GNP captured in the computation of rupee value of
goods butn ot services. (a) have a large GDP than GNP
(d) The part of GNP that the government devotes to the (b) have smaller GDP than GNP
construction of roads, airports, and the like. (c) grow slower economically than the other country
(e) The part of GNP used by business to add to productive (d) grow faster economically than the other country.
capacity, and by households to add to their stock of new 44. ** Which of the following would be the best measure of
houses. changes in the standard of living in an economy, expressed in a
35. ** Monetary policy that results in lowering interest rate is: time
(a) Contractionary series?
(b) Expansionary (a) real GDP
(c) Moderate (b) output per labor hour of output
(d) deflationary (c) real GDP per capita
(d) nominal GDP per capita

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 Rise University Campus
Examination July 2021 – 2nd Semester (Mid Term)
(Objective Type Paper)
Total Marks: 50 Time: 01 Hour

45. ** Disposable income is: 48. ** In calculating National income, double counting can be
(a) Income less taxes avoided by.
(b) Income less Direct taxes (a) deducting taxes and adding subsidies
(c) Income less indirect taxes (b) deducting imports and adding exports
(d) All of these (c) excluding the value of the output from intermediate goods
46. ** Most important economic indicator of the health of an (d) excluding the value of transactions in second hand goods
economy is: 49. ** If capital consumption is greater than gross investment
(a) Income per capita (a) Gross investment must be negative
(b) National output (b) Gross investment must be declining
(c) Literacy rate (c) Net investment is negative
(d) None of the above (d) replacement investment is rising
47. ** Which one of the following is a transfer payment in 50. ** An increase in disposable income:
National income accounting (a) increases economic good
(a) Educational scholarships (b) reduces economic good
(b) Salaries of employees (c) reduces spending
(c) Payments for text books (d) has no effect on economy
(d) Payment for examination fee

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