MCQs on Economics -21

1. Assertion (A) : The Natural Rate of Unemployment Hypothesis yields in the long run a vertical Phillips Curve.
Reason (R) : The Natural Rate of Unemployment assumes static price expectations.
Codes :
(A) (A) is correct and (R) is the correct explanation of (A).
(B) Both (A) and (R) are correct and (R) is not the correct explanation of (A).
(C) (A) is correct, but (R) is incorrect.
(D) Both (A) and (R) are incorrect.


2. In the context of different business cycle theories match the nature of cycle/approach given in List – I with the propounders in List – II :
List– I                                                                                                 List – II
i. Constrained Cycles                                         1. Paul A. Samuelson
ii. Acceleration – Multiplier Interaction Approach   2. J. R. Hicks
iii. Capital – Stock Adjustment Principle              3. Nicholas Kaldor
iv. Real Business Cycles                                    4. Robert J. Barro

Codes :
       i ii iii iv
(A) 2 1 3 4
(B) 1 2 4 3
(C) 2 1 4 3
(D) 1 3 2 4


3. Assuming fixed prices, which of the following statements are true?
1. Monetary policy is more effective, flatter the IS-curve.
2. Fiscal policy is less effective, flatter the LM curve.
3. Fiscal policy is more effective, flatter the LM curve.
4. Monetary policy is ineffective and fiscal policy is fully effective in liquidity trap.

Codes :
(A) 1, 2, 4
(B) 1, 3, 4
(C) 2, 3, 4
(D) None of the above


4. Match items given in List – I with those given in List – II :
List– I                                                                                        List – II
a. Inventory Theoretic Approach                                                   1. J.M. Keynes
b. Liquidity Preference as Behaviour Towards Risk                         2. Milton Friedman
c. Money as a Temporary Abode of Purchasing Power                   3. James Tobin
d. A Discontinuous Individual Speculative Demand for Money Function   4. W. Baumol

Codes :
      a b c d
(A) 1 4 3 2
(B) 2 3 4 1
(C) 3 2 1 4
(D) 4 3 2 1


5. Which country stands at the top in 2011 Human Development Index ranking of 187 countries in H.D.I. Report – 2011 ?
(A) Norway
(B) Australia
(C) New Zealand
(D) U.S.A.


6. By an unlimited supply of labour, Lewis meant
(A) infinite elasticity of demand for labour
(B) infinite elasticity of supply for labour
(C) infinite labour available at prevailing wage rate
(D) none of the above


7. According to Mrs. Robinson, the stage of ‘Golden Age’ = _______.
(A) Capital growth rate > Labour growth rate
(B) Capital growth rate = Labour growth rate
(C) Capital growth rate < Labour growth rate
(D) Capital growth rate > 1


8. According to whom, surplus value should be given to labour ?
(A) Adam Smith
(B) Karl Marx
(C) Gandhiji
(D) Sen


9. According to Kuznets, innovation is
(A) Application of new knowledge to production process
(B) Improvement of efficiency of machines
(C) Discovery of new consumption needs
(D) Improvement of marketing techniques


10. The approach of social dualism is connected with the following country :
(A) Indonesia
(B) U.K.
(C) Iran
(D) Pakistan



11. Assertion (A) : A lump sum tax imposed on a monopolist cannot be shifted to the consumers.
Reason (R) : The lump sum tax becomes a part of his fixed cost and it does not affect the marginal cost of production.
Codes :
(A) (A) is true, but (R) is false.
(B) Both (A) and (R) are false.
(C) (A) is not correct, but (R) is correct.
(D) Both (A) and (R) are correct and (R) is the correct explanation of (A).


12. The case for progressive tax rates exists in terms of
(A) Benefits received
(B) Cost of service
(C) Ability to pay
(D) Voluntary exchange approach


13. According to Peacock and Wiseman’s analysis, public expenditure increases
(A) in smooth and continuous manner
(B) as time passes
(C) in jerks or step like fashion
(D) both in the short and long runs


14. Which one of the following debt redemption method is a process by which maturing debts are replaced by new bonds and there is no liquidation of the money burden of debt ?
(A) Repudiation
(B) Refunding
(C) Conversion
(D) Capital levy


15. Fiscal deficit less interest payments is called
(A) Net fiscal deficit
(B) Monetised deficit
(C) Primary deficit
(D) Budgetary deficit

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