MCQs on Economics -22

1. Arrange the following theories in order in which they appeared :
I. Comparative Cost Advantage Theory
II. Absolute Cost Advantage Theory
III. Leontief Paradox
IV. Factor Endowment Theory
Codes :
(A) I, III, II, IV
(B) II, III, IV, I
(C) II, I, IV, III
(D) I, IV, II, III


2. List – I                                                      List – II
I. New Classical Economics         1. T.H. Haavelmo
II. Permanent Income Hypothesis  2. Robert Lucas
III. Multiple effect of Balanced Budget  3. N. Gregory Mankiw
IV. New Keynesian Economics          4. Milton Friedman
Codes :
       I II III IV
(A) 3 4 1 2
(B) 4 3 2 1
(C) 2 4 1 3
(D) 1 2 4 3


3. The producer will substitute capital for labour till he reaches that point of isoquant at which,
(A) The price of the good he produces equals wage rate.
(B) Marginal rate of technical substitution equals interest rate.
(C) Marginal rate of technical substitution equals marginal revenue.
(D) Marginal rate of technical substitution equals the ratio of marginal productivity of labour and capital.


4. List – I                   List – II
I. Invisible Hand       1. Karl Marx
II. Warrier Knight      2. Adam Smith
III. PQLI                   3. Schumpeter
IV. Surplus Value    4. Morris D. Morris
Codes :
      I II III IV
(A) 1 4 2 3
(B) 2 3 4 1
(C) 1 2 3 4
(D) 4 3 2 1



5. Which of the following statements does not hold true in case of the Keynesian Economics ?
(A) Velocity of money is an unstable function of its determinants.
(B) Labour is subject to money illusion.
(C) Aggregate supply function tends to become flat at levels of output well below full employment and to become steeper as full capacity is reached.
(D) Aggregate supply schedule is vertical, and output and employment are completely supply determined.


6. Tobin’s q-theory of investment indicates that firms add to their stock of capital when
(A) the replacement value of their real assets exceeds the market value of their financial assets.
(B) the market value of their financial assets exceeds the replacement value of their real assets.
(C) the market value of their real assets exceeds the book value of their financial assets.
(D) the market value of their financial assets exceeds the book value of their real assets.


7. Liquidity trap is a situation when
(A) all potential investors expect the rate of interest to rise in future
(B) all potential investors expect the rate of interest to fall in future
(C) natural rate of interest is above the critical rate of interest
(D) demand for money for speculative purpose is interestinelastic


8. List – I                                   List – II
I. Adam Smith        1. Availability doctrine
II. David Ricardo    2. Factors endowment
III. Ohlin                 3. Absolute advantage
IV. I.B. Kravis         4. Comparative advantage
Codes :
       I II III IV
(A) 1 2 3 4
(B) 3 4 2 1
(C) 2 4 3 1
(D) 4 3 1 2


9. In Harrod’s model of economic growth, if warranted rate is below the natural rate of growth then it is possible to maintain steady state growth at the warranted rate with
(A) continually increasing unemployment
(B) a constant rate of unemployment
(C) continually decreasing unemployment
(D) None of the above


10. Which of the following is not a feature of the A.W. Phillip’s inflationunemployment trade-off relation ?
(A) A non-linear inverse relationship between unemployment rate and the rate of exchange in wage rate.
(B) There is a loop in the anticlockwise around the Phillip’s curve.
(C) The wage-inflation unemployment relationship is predictable.
(D) Philip’s curve shifts when expected rate of inflation shifts


11. Suppose there is full employment and vertical aggregate supply schedule. An increase in the nominal money supply
(A) reduces the rate of interest and changes the composition of output
(B) causes a proportional increase in real output
(C) has no effect on the real money supply or the composition of output
(D) causes the real money supply to increase, which changes composition of output


12. If the monopolist incurs loss in the short run, then in the long run
a. he will go out of business
b. he will stay in business
c. he will break even
d. any of the above is possible
(A) a and b
(B) a and c
(C) a only
(D) d only


13. The condition of Pareto Optimality holds correct under
(A) Perfect Competition
(B) Monopolistic Competition
(C) Oligopoly
(D) Monopoly


14. Assertion (A): Compared to the individual supply curve, the aggregate supply curve is more elastic.
Reason (R): There is the possibility of moving between being out of the labour force and being in the labour force.
Choose amongst the following the correct answer.
Codes:
(A) (A) is correct, but (R) is not the correct explanation of (A).
(B) (A) is correct and (R) is the correct explanation of (A).
(C) (A) is correct, but (R) is incorrect.
(D) (A) is incorrect, but (R) is correct


15. List – I                                        List – II
I. IS-LM Theory                           1. Franko Modigliani & Richard Brumberg
II. Consumption Ratchet              2. Lucas & Sargent
III. Life Cycle Hypothesis             3. Hicks and Hanson
IV. Critics of Keynesian Economics    4. James Dussenbery
Codes :
      I II III IV
(A) 3 4 1 2
(B) 3 2 1 4
(C) 4 3 1 2
(D) 1 3 4 2

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