INTRODUCTION TO MACRO ECONOMICS

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Questions:

Multiple Choice Question

100 x 1 = 100

Match the correct codes

1	Profit	i	Capitalism
2.	Social Welfare	ii	Socialism
3.	Social Welfare and Profit Motive	iii	Capitalist Economy
4.	Free Market System	iv	Mixed Economy

(a)

(1) – (i) (2) – (ii) (3) – (iii) (4) – (iv)

(b)

(1) – (ii) (2) – (iii) (3) – (iv) (4) – (i)

(c)

(1) – (iv) (2) – (iii) (3) – (i) (4) – (ii)

(d)

(1) – (i) (2) – (ii) (3) – (iv) (4) – (iii)

Match the correct codes

1.	“The General Theory of Employment, Interest and Money	i.	A.J.Brown
2.	Globalism The term coined by Manfred D Steger	ii.	1936
3.	The word ‘Macro’ is derived from the Greek word ‘Makros’ meaning	iii.	2002
4.	“A system by which people earn their living"	iv.	Large

(a)

(1) – (i) (2) – (ii) (3) – (iv) (4) – (iii)

(b)

(1) – (ii) (2) – (iii) (3) – (iv) (4) – (i)

(c)

(1) – (iv) (2) – (iii) (3) – (i) (4) – (ii)

(d)

(1) – (i) (2) – (ii) (3) – (iii) (4) – (iv)

With what kinds of topics does macroeconomics concern itself?

(a)

Economic activities of individual firms, households, and other organizations

(b)

Forces of supply and demand in a particular market

(c)

Consumer behavior and firms output decisions

(d)

Aggregate economic phenomena like the rate of unemployment and inflation

For an economy consisting of households and businesses only, which of the following is consistent with the circular flow of income and production?

(a)

Households are producers of goods and services and consumers of resources

(b)

Households are users of resources, and businesses are sources of saving

(c)

Households are suppliers of resources and consumers of goods and services

(d)

Businesses are users of taxes, and households are sources of taxes.

The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?

(a)

laissez-faire economy

(b)

laissez-faire economy

(c)

mixed market economy

(d)

macroeconomic system

Which of the following is a basic characteristic of Capitalism?

(a)

economic decisions occur in markets

(b)

income is distributed on the basis of “need.”

(c)

private ownership of property is illegal

(d)

none of the above answers are correct

Unlike a market economy, a command economy uses

(a)

more centralized planning in economic decision making

(b)

consumer sovereignty to make production decisions

(c)

its resources more efficiently

(d)

price signals in economic decision making

Which of the following could not be considered a major economic system?

(a)

capitalism

(b)

communism

(c)

socialism

(d)

secularism

In the circular-flow diagram

(a)

Spending on goods and services flow from firms to households

(b)

Goods and services flow from households to firms

(c)

Factors of production flow from firms to households

(d)

Income from factors of production flows from firms to households

10.

In the circular-flow diagram

(a)

Firms are sellers in the resource market and the product market

(b)

Households are sellers in the resource market

(c)

Firms are buyers in the product market

(d)

Spending on goods and services flow from firms to households

11.

Which of the following statements regarding the circular-flow diagram is true?

(a)

If Vijay works for XYZ Solutions Ltd. and receives a salary payment, the transaction takes place in the market for goods and services.

(b)

If Vijay works for XYZ Solutions Ltd. and receives a salary payment, the transaction takes place in the market for goods and services.

(c)

None of these answers

(d)

The factors of production are owned by households.

12.

Which of the following is a limitation of the simple circular flow model?

(a)

Product markets are ignored

(b)

Resource markets are ignored.

(c)

The determination of product and resource prices is not explained.

(d)

Households are included, but not businesses.

13.

The simple circular flow model shows that:

(a)

Households are on the buying side of both product and resource market

(b)

Businesses are on the selling side of both product and resource markets

(c)

Households are on the selling side of the resource market and on the buying side of the product market

(d)

Businesses are on the buying side of the product market and on the selling side of the resource market.

14.

The interaction of individuals and firms in a market can be described as a _______ of money, goods and services and resources through product and factor markets.

(a)

Constant flow

(b)

Stable flow

(c)

Circular Flow

(d)

Circular Flow

15.

In a free-market economy the allocation of resources is determined by:

(a)

Votes taken by consumers

(b)

A central planning authority

(c)

By consumer preferences

(d)

The level of profits of firms

16.

Assertion: National plans are drawn up by the Government and both private and public sectors abide.
Reason: The central planning authority prepares the economic plans.

(a)

Both A and R are true and R is the correct explanation of A

(b)

Both A and R are true but R is not the correct explanation of A.

(c)

A is true but R is false

(d)

A is false but R is true.

17.

Assertion: In a mixed economy, all the resources are owned and operated by the government.
Reason: Public welfare is the main motive behind all economic activities in mixed economy.

(a)

Both A and R are true and R is the correct explanation of A.

(b)

Both A and R are true but R is not the correct explanation of A.

(c)

A is true but R is false.

(d)

Both A and R are false.

18.

Assertion: Each individual and organization produce only those goods which ensure high profit.
Reason: Profit is the driving force behind all economic activities in a capitalistic economy

(a)

Both A and R are true and R is the correct explanation of A.

(b)

Both A and R are true but R is not the correct explanation of A

(c)

A is true but R is false

(d)

A is false but R is true

19.

Assertion: The means of production in a capitalistic economy are publicly owned.
Reason: Manufacturers produce goods and services with profit motive

(a)

Both A and R are true and R is the correct explanation of A.

(b)

Both A and R are true but R is not the correct explanation of A.

(c)

A is true but R is false

(d)

A is false but R is true

20.

Assertion: Economic System refers to the manner in which individuals and institutions are connected together to carry out economic activities in a particular area.
Reason: It is the methodology of doing economic activities to meet the needs of the society.

(a)

Both A and R are true and R is the correct explanation of A.

(b)

Both A and R are true but R is not the correct explanation of A.

(c)

A is true but R is false.

(d)

A is false but R is true.

21.

Assertion: The major problems of most resource - rich nations are poverty and unemployment.
Reason: A clear understanding about the magnitude of poverty and unemployment facilitates allocation of resources and initiation corrective measures

(a)

Both A and R are true and R is the correct explanation of A

(b)

Both A and R are true but R is not the correct explanation of A

(c)

A is true but R is false.

(d)

A is false but R is true

22.

Which of the following is not a macroeconomic goal?

(a)

Full Employment

(b)

Price Stability

(c)

Economic Security

(d)

All of the above are macro economic goals

23.

Find the incorrect match

(a)

Capitalistic Economy - Capitalism

(b)

Command Economy - Socialism

(c)

Socialistic Economy - Globalism

(d)

Mixed Economy- Mixedism

24.

Given the chart, find the missing activity of an economy.

(a)

Foreign Activity

(b)

Excess Activity

(c)

Exchange Activity

(d)

Government Activity

25.

Given the chart, find the missing system of economy

(a)

Pure Mixed

(b)

Capitalist Learning

(c)

Mixed Learning

(d)

Marxis

26.

Find the missing flow from households to government in the diagram

(a)

Revenue

(b)

Fees

(c)

Taxes

(d)

None of the above

27.

Find the odd one out

(a)

C + I

(b)

C + I + G + (X – M)

(c)

C + I + G

(d)

(X – M)

28.

Identify which of following is not a feature of mixed economy?

(a)

Coexistence of Public and Private Sectors

(b)

Solution to Economic Problems

(c)

Equality of Income

(d)

Freedom and Control

29.

Match the items in the List – I with items in List – II. Select the correct answer from the code given below

List – I	List – II
I. Ownership of Means of Production	1. Free market System
II. Economic Motives	2. Private Ownership
III. Solution of Central Problems	3. Internal Regulation Only
IV. Government Role	4. Profit

(a)

I	II	III	IV
3	2	1	4

(b)

I	II	III	IV
2	4	1	3

(c)

I	II	III	IV
2	3	4	1

(d)

I	II	III	IV
3	4	1	2

30.

Assertion: Planning is an integral part of a Capitalist economy.
Reason: In socialist system, all decisions are undertaken by the central planning authority

(a)

Both (A) and (R) are true and (R) is the correct explanation of (A).

(b)

Both (A) and (R) are true, but (R) is not the correct explanation of (A)

(c)

(A) is true, but (R) is false

(d)

(A) is false, but (R) is true

31.

Assertion: The government has a limited role in a capitalistic economy.
Reason: The government provides basic services such as, defense, public health, education, etc.

(a)

Both (A) and (R) are true and (R) is the correct explanation of (A).

(b)

Both (A) and (R) are true, but (R) is not the correct explanation of (A).

(c)

(A) is true, but (R) is false

(d)

(A) is false, but (R) is true

32.

Assertion: Each individual and organization produce only those goods which ensure high profit.
Reason: Profit is the driving force behind all economic activities in a capitalistic economy

(a)

Both (A) and (R) are true and (R) is the correct explanation of (A).

(b)

Both (A) and (R) are true, but (R) is not the correct explanation of (A).

(c)

(A) is true, but (R) is false

(d)

(A) is false, but (R) is true

33.

Assertion: The term coined by Manfred D Steger (2002) to denote the new market ideology of globalization.
Reason: The ideology connects nations together through international trade and aiming at global development.

(a)

Both (A) and (R) are true and (R) is the correct explanation of (A).

(b)

Both (A) and (R) are true, but (R) is not the correct explanation of (A).

(c)

(A) is true, but (R) is false

(d)

(A) is false, but (R) is true.

34.

What shows flows of income, goods and services and factors of production between economic agents such as firms, households, government and nations

(a)

Circular Flow

(b)

Regular Flow

(c)

Cost Flow

(d)

Expenditure Flow

35.

Pick basic composition of three sector of model of economy

(a)

Y = C + I + G + (X – M)

(b)

Y = C + I + G

(c)

Y = C + S

(d)

Y = C + I

36.

Pick basic composition of three sector of model of economy.

(a)

Y = C + I + G + (X – M)

(b)

Y = C + I + G

(c)

Y = C + S

(d)

Y = C + I

37.

Pick basic composition of two sector of model of economy

(a)

Y = C + I + G + (X – M)

(b)

Y = C + I + G

(c)

Y = C + S

(d)

Y = C + I

38.

The firm sector generates its _________ by selling goods and services to the household sector.

(a)

revenue

(b)

sales

(c)

expenditure

(d)

cost

39.

From the households sectors receives the income?

(a)

households sector

(b)

government expenditure

(c)

external sector

(d)

firm sector

40.

How many models of circular flow of economy are there?

(a)

One

(b)

Three

(c)

Five

(d)

Two

41.

_______used in economic analysis are classified as stock and flow

(a)

Models

(b)

Variables

(c)

Charts

(d)

Equations

42.

Which of the following system leads to leads to frequent violent economic fluctuations and crises?

(a)

Free market system

(b)

Restricted market system

(c)

Black market system

(d)

New market system

43.

What is considered as the heart of any capitalistic economy?

(a)

Sales mechanism

(b)

Price mechanism

(c)

Demand mechanism

(d)

Exchange mechanism

44.

Identify which is not an example of capitalistic economy.

(a)

The USA economy

(b)

Germany economy

(c)

Indian economy

(d)

Australia economy

45.

What is the term coined by Manfred D Steger (2002) to denote the new market ideology of globalisation that connects nations together through international trade and aiming at global development?

(a)

Extended Capitalism

(b)

Confined Capitalism

(c)

Favourable Capitalism

(d)

None of above

46.

Identify which is not a part of classification of economy based on Level of National Income

(a)

Foreign Income Economies

(b)

Low Income Economies

(c)

Middle Income Economies

(d)

High Income Economies

47.

Identify which is not a part of classification of economy based on System of Activities

(a)

Capitalistic Economies

(b)

Institutional Economies

(c)

Socialistic Economies

(d)

Mixed Economies

48.

Identify which is not a part of classification of economy based on Status of Development

(a)

Mixed Economy

(b)

Developed and underdeveloped economie

(c)

Undeveloped economies

(d)

Developing economies

49.

How the economy is divided based Nature of Functioning?

(a)

Static and Dynamic Economies

(b)

Developed and underdeveloped economies

(c)

Capitalist and Socialist economics

(d)

None of above

50.

Identify which of the following is not an external activity?

(a)

import and export

(b)

international relations

(c)

emigration and immigration

(d)

central bank policy

51.

What supports the production and consumption activities?

(a)

production activity

(b)

consumption activity

(c)

distribution activity

(d)

exchange activity

52.

Who defined the following statement for an economy? “An economy is a cooperation of producers and workers to make goods and services that satisfy the wants of the consumers".

(a)

A.J. Brown

(b)

J.R. Hicks

(c)

J.S. Mill

(d)

J.M. Keynes

53.

Who defined the following statement for an economy? “A system by which people earn their living.”

(a)

J.R. Hicks

(b)

A.J. Brown

(c)

J.S. Mill

(d)

J.M. Keynes

54.

The growth and development of an economy and the factors determining them could be understood only through________

(a)

macro analysis

(b)

micro analysis

(c)

positive analysis

(d)

rational analysis

55.

Inflation refers to steady ________ in general price level.

(a)

decrease

(b)

increase

(c)

constant

(d)

flat

56.

Identify which is not a subject matters covered in Macro Economics

(a)

employment

(b)

national income

(c)

inflation

(d)

Profit maximization

57.

Macro economics in its modern form, began with John Maynard Keynes and his book “The General Theory of Employment, Interest and Money” published in______?

(a)

1936

(b)

1963

(c)

1935

(d)

1937

58.

Who was the Norwegian economist and co-recipient of the first Nobel Prize?

(a)

JM Keynes

(b)

JR Hicks

(c)

Ragnar Frisch

(d)

Adam Smith

59.

The subject Economics is classified into two branches, namely,

(a)

Micro Economics and Minor Economics

(b)

Micro Economics and Macro Economics

(c)

Positive and Normative economics

(d)

Deductive and inductive economics

60.

Capitalism leads to ___________.

(a)

Central planning

(b)

Class struggle

(c)

Welfare

(d)

All the above

61.

Identify the economic system where all decision are under taken by the central planning authority.

(a)

Socialist economy

(b)

Globalistic economy

(c)

Mixed economy

(d)

Capitalistic economy

62.

Identify the economic system where only public ownership of production exists.

(a)

Capitalistic economy

(b)

Socialistic economy

(c)

Globalistic economy

(d)

Mixed economy

63.

Identify the stock variable.

(a)

Wealth

(b)

Income

(c)

Foreign exchange

(d)

Money

64.

Identify the Father of Scientific Socialism.

(a)

Adamsmith

(b)

J.M. Keynes

(c)

Karl Marx

(d)

Marshall

65.

________ is a combination of both capitalism and socialism.

(a)

Socialistic economy

(b)

Capitalistic economy

(c)

Traditional economy

(d)

Mixed economy

66.

In addition to household and firms, inclusion of the government sector make this model a ________ model.

(a)

Single sector model

(b)

Two sector model

(c)

Three sector model

(d)

Four sector model

67.

_________ sector sells the entire output to house holds.

(a)

Firm

(b)

House hold

(c)

Government

(d)

Foreign trade

68.

Non-interference of the state is a characteristic features of the ___________.

(a)

Socialist Economy

(b)

Capitalist Economy

(c)

Traditional Economy

(d)

Command Economy

69.

Absence of Price Mechanism is a characteristic feature of the ___________.

(a)

Socialist economy

(b)

Capitalist economy

(c)

Traditional economy

(d)

Mixed economy

70.

The right to property exists largely in _______.

(a)

Traditional society

(b)

Capitalism

(c)

Socialism

(d)

Mixed economy

71.

Market forces are _________.

(a)

Supply and price

(b)

Demand and price

(c)

Prices of commodity

(d)

Supply and demand

72.

Socialist Economy promote __________.

(a)

Social welfare motive

(b)

Collective welfare motive

(c)

Profit motive

(d)

Both 'a' and 'b'

73.

Combination of both capitalism and socialism ________.

(a)

Capitalist Economy

(b)

Traditional Economy

(c)

Mixed Economy

(d)

Socialist Economy

74.

Example for Mixed Economy ________.

(a)

India

(b)

France

(c)

China

(d)

Both 'a' and 'b'

75.

Father of socialism _________.

(a)

Adamsmith

(b)

J.M. Keynes

(c)

Karl Marx

(d)

J.R. Hicks

76.

Planned economy is also known as _________.

(a)

Capitalist Economy

(b)

Socialist Economy

(c)

Mixed Economy

(d)

All the above

77.

Macro economics is also known as __________.

(a)

Price theory

(b)

Income theory

(c)

Business cycle

(d)

Poverty and unemployment

78.

Macro means ________.

(a)

Large

(b)

Aggregate

(c)

Economy as a whole

(d)

All the above

79.

Micro means __________.

(a)

Large

(b)

Big

(c)

Small

(d)

Both 'a' and 'b'

80.

A steady fall in general price level is termed as ___________.

(a)

Deflation

(b)

Inflation

(c)

Trade

(d)

To achieve growth

81.

The Circular Flow Model that represents an open Economy

(a)

Two Sector Model

(b)

Three Sector Model

(c)

Four Sector Model

(d)

All the above

82.

Identify the sectors of a Two Sector Model.

(a)

Households and Firms

(b)

Private and Public

(c)

Internal and External

(d)

Firms and Government

83.

Identify the flow variable

(a)

money supply

(b)

assests

(c)

income

(d)

foreign exchange reserves

84.

Quantity of a commodity accumulated at a point of time is termed as ____________..

(a)

production

(b)

stock

(c)

variable

(d)

flow

85.

An economic system where the economic activities of a nation are done both by the private and public together is termed as__________

(a)

Capitalistic Economy

(b)

Socialistic Economy

(c)

Globalisic Economy

(d)

Mixed Economy

86.

Identify The Father of Socialism

(a)

J M Keynes

(b)

Karl Marx

(c)

Adam Smith

(d)

Samuelson

87.

The country following Capitalism is ________________

(a)

Russia

(b)

America

(c)

India

(d)

China

88.

Who is referred as ‘Father of Capitalism’?

(a)

Adam Smith

(b)

Karl Marx

(c)

Thackeray

(d)

J M Keynes

89.

Economic system representing equality in distribution is _________.

(a)

Capitalism

(b)

Globalism

(c)

Mixedism

(d)

Socialism

90.

Identify the economic system where only private ownership of production exists

(a)

Capitalistic Economy

(b)

Socialistic Economy

(c)

Globalisic Economy

(d)

Mixed Economy

91.

An economy consists of

(a)

consumption sector

(b)

Production sector

(c)

Government sector

(d)

All the above

92.

Indicate the fundamental economic activities of an economy

(a)

Production and Distribution

(b)

Production and Exchange

(c)

Production and Consumption

(d)

Production and Marketing

93.

Identify the necessity of Economic policies

(a)

to solve the basic problems

(b)

to overcome the obstacles

(c)

to achieve growth

(d)

all the above

94.

A steady increase in general price level is termed as_____________.

(a)

wholesale price index

(b)

Business Cycle

(c)

Inflation

(d)

National Income

95.

Indicate the contribution of J M Keynes to economics

(a)

Wealth of Nations

(b)

General Theory

(c)

Capital

(d)

Public Finance

96.

Macro economics is a study of_________

(a)

individuals

(b)

firms

(c)

a nation

(d)

aggregates

97.

Identify the other name for Macro Economics.

(a)

Price Theory

(b)

Income Theory

(c)

Market Theory

(d)

Micro Theory

98.

Who is regarded as Father of Modern Macro Economics?

(a)

Adam Smith

(b)

J M Keynes

(c)

Ragnar Frisch

(d)

Karl Marx

99.

Who coined the word ‘Macro’?

(a)

Adam Smith

(b)

J M Keynes

(c)

Ragnar Frisch

(d)

Karl Marx

100.

The branches of the subject Economics are

(a)

Wealth and Welfare

(b)

Production and Consumption

(c)

Demand and Supply

(d)

Micro and Macro

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Answers Key:

Multiple Choice Question

100 x 1 = 100

(d)
(1) – (i) (2) – (ii) (3) – (iv) (4) – (iii)

(b)
(1) – (ii) (2) – (iii) (3) – (iv) (4) – (i)

(d)
Aggregate economic phenomena like the rate of unemployment and inflation

(a)
economic decisions occur in markets

(a)
more centralized planning in economic decision making

(d)
secularism

(a)
Spending on goods and services flow from firms to households

10.

(b)
Households are sellers in the resource market

11.

(d)
The factors of production are owned by households.

12.

13.

14.

15.

16.

17.

(d)
Both A and R are false.

18.

(a)
Both A and R are true and R is the correct explanation of A.

19.

(d)
A is false but R is true

20.

(a)
Both A and R are true and R is the correct explanation of A.

21.

(b)
Both A and R are true but R is not the correct explanation of A

22.

(d)
All of the above are macro economic goals

23.

24.

25.

(b)
Capitalist Learning

26.

(a)
Revenue

27.

(d)
(X – M)

28.

29.

(b)

I II III IV

2 4 1 3

30.

(d)
(A) is false, but (R) is true

31.

(b)
Both (A) and (R) are true, but (R) is not the correct explanation of (A).

32.

(a)
Both (A) and (R) are true and (R) is the correct explanation of (A).

33.

(a)
Both (A) and (R) are true and (R) is the correct explanation of (A).

34.

(a)
Circular Flow

35.

(a)
Y = C + I + G + (X – M)

36.

(b)
Y = C + I + G

37.

(d)
Y = C + I

38.

(a)
revenue

39.

(d)
firm sector

40.

(b)
Three

41.

(b)
Variables

42.

(a)
Free market system

43.

(b)
Price mechanism

44.

45.

(a)
Extended Capitalism

46.

(d)
High Income Economies

47.

48.

(a)
Mixed Economy

49.

(a)
Static and Dynamic Economies

50.

(d)
central bank policy

51.

(d)
exchange activity

52.

(b)
J.R. Hicks

53.

(b)
A.J. Brown

54.

(a)
macro analysis

55.

(b)
increase

56.

(d)
Profit maximization

57.

(a)
1936

58.

59.

(b)
Micro Economics and Macro Economics

60.

(b)
Class struggle

61.

(a)
Socialist economy

62.

(b)
Socialistic economy

63.

(a)
Wealth

64.

65.

(d)
Mixed economy

66.

67.

(a)
Firm

68.

(b)
Capitalist Economy

69.

(a)
Socialist economy

70.

(b)
Capitalism

71.

(d)
Supply and demand

72.

(d)
Both 'a' and 'b'

73.

74.

(d)
Both 'a' and 'b'

75.

76.

(b)
Socialist Economy

77.

(b)
Income theory

78.

(d)
All the above

79.

80.

(a)
Deflation

81.

82.

(a)
Households and Firms

83.

84.

(b)
stock

85.

(d)
Mixed Economy

86.

(b)
Karl Marx

87.

(b)
America

88.

(a)
Adam Smith

89.

(d)
Socialism

90.

(a)
Capitalistic Economy

91.

(d)
All the above

92.

93.

(d)
all the above

94.

95.

(b)
General Theory

96.

(d)
aggregates

97.

(b)
Income Theory

98.

(b)
J M Keynes

99.

100.

(d)
Micro and Macro

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