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Review questions

Macroeconomics deals with a. firms b. industriesc. economy as a whole

Macroeconomics has two important schools of thought.

What are they? a. Old school and new school b. NewKeynesians and New Classical school c. Rightists

And Leftists

What is one of the main feature of the New Keynesian

School? a. Price rigidity b. supply rigidity c. demand

rigidity

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GDP is

a.value of all final goods and services produced in

the country within a given period b. value of all goodsand services produced in the country within a given

period c. value of all goods and services produced

in the country within a given period by the citizens of

the country

GDP at factor cost is

a.GDP at market prices minus indirect taxes

b. GDP at market prices minus income taxes

c. GDP at market prices minus depreciation

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IfGDP>GNP,

a. domestic residents (Indians) are earning

less abroad than what foreigners are earning in Indiab. domestic residents (Indians) are earning

more abroad than what foreigners are earning in India

c. domestic residents (Indians) are earning

what foreigners are earning in India

National Income (NI) = Indirect Taxes

Fill up the blank with one of the options given below:

a. GDPb. GNP

c. NNP

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PERSONALDISPOSABLE INCOME = PERSONAL

INCOME .

Fill in the blank with one of the options given below:

a. Sales tax

b. Personal tax

c. NNP

In the Expenditure approach (for measuring GDP),

AGGREGATE DEMAND is equal to,

a. Consumption +Investmentb. Consumption + Investment + Govt. spending

c. Consumption + Investment + Govt. spending + Net

exports

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Aggregate demand can be shifted by,

a. Monetary policy only

b. Fiscal policy only

c. Both monetary and fiscal policy

Is full employment level of output always equal to

Equilibrium output?

a. No

b. Yes

c. Cant say

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Assume that forIndia, Savings = 750, Investment = 770

Budget Deficit = 150. It means that,

a. Indian exports are greater (in value terms) thanimports

b. Indian imports are greater (in value terms) than

exports

c. Indian exports are equal (in value terms) to Indianimports

Output is at its equilibrium level

a. when output produced is equal to output demandedb. when output produced is greater than output

demanded

c. when output produced is less than output demanded

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Answer the following:

a. Explain the concept of multiplier (consumption)

b. Assume that c (MPC) is 0.8 and t (tax rate) is 25%.

If government increases spending by Rs 5,00,000,

what is the change in the economys output? Explainwith the help of a diagram how govt. spending

increases the level of output in the economy.

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c. The govt. wants to increase output in the economy

from Rs 1000 to Rs 1300 by changing the tax rate.

Assuming that MPC is 0.7 and the present tax rate is30 percent, what should be the new tax rate in order to

achieve the govt.s objective?