Top 80+ Solved Macroeconomics, Theories and Policies 2 MCQ Questions Answer
Q. Assertion (A): According to Keynes, individuals hold either cash or all bonds.Reasoning (R): Because, according to him, the speculative demand for money is associated with uncertainty. Codes:
a. both (a) and (r) are correct and (r) is the correct explanation of (a).
b. both (a) and (r) are correct, but (r) is not the correct explanation of (a).
c. (a) is correct, but (r) is incorrect.
d. both (a) and (r) are incorrect.
Q. Speculative demand for money is zero when market rate of interest is
a. more than the ‘critical rate’.
b. more than the market rate of interest but less than the critical rate (i.e. capital gains occur).
c. less than the market rate of interest.
d. lowest (i.e. in liquidity trap).
Q. Assertion (A) : There exits inverse relationship between interest rates and bond prices. Reason (R) : A bond price represents the present discounted value of the payments agreed uponat the time when the bond was issued. Codes :
a. both (a) and (r) are correct, and (r) is the correct explanation of (a).
b. (a) is correct, but (r) is not the correct explanation of (a).
c. (a) is correct, but (r) is incorrect.
d. (a) is incorrect, but (r) is correct.
Q. According to Says law of market what is the main cause of overproduction?
a. unemployment
b. fall in demand
c. rise in price
d. fall in wage rate
Q. In Classical system how to correct an overproduction or glut in the market?
a. by increasing price o f input
b. by wage cut policy
c. by price cut policy
d. by decreasing production
Q. According to Classical what bring full employment in an economy?
a. flexible wage and rigid price
b. a rigid wage and flexible price
c. wage price flexibility
d. wage price rigidity
Q. What is the effect of monetary policy in a situation of “Liquidity trap”?
a. expansionary monetary policy
b. contractionary monetary policy
c. both expansionary and contractionary monetary policy effective
d. monetary policy ineffective
Q. In which of the following market Keynes effect operates?
a. goods market
b. labour market
c. money market
d. all of the above markets
Q. In which of the following market Pigou effect operates?
a. goods market
b. labour market
c. money market
d. all of the above markets
Q. Real balance effect is equal to –
a. pigou effect divided by keynes effect
b. pigou effect into keynes effect
c. pigou effect + keynes effect
d. pigou effect - keynes effect
Q. Under perfect competition firm hire labour until-
a. money wage rate > general price level
b. money wage rate < general price level
c. money wage rate = general price level
d. both a and c
Q. Classical dichotomy is based on –
a. neutrality of money
b. velocity of money
c. medium of exchange of money
d. both a and b
Q. Cambridge K is related to –
a. restatement theory of money
b. cash balance approach
c. liquidity preference theory
d. transaction version of quantity theory of money
Q. Assertion (A) : In liquidity trap, the demand for money is perfectly interest elastic. Reason (R) : Because in this situation, all the investors expect the market rate of interest to risetowards the natural rate of interest. Codes :
a. (a) & (r) both are correct and (r) is the correct explanation of (a)
b. (a) & (r) both are correct, but (r) is not the correct explanation of (a)
c. (a) is correct, but (r) is incorrect.
d. both (a) and (r) are incorrect.
Q. Which of the following is not specifically mentioned as a determinant of the demand formoney ?
a. wealth
b. nominal yield on alternative assets
c. inflation rate
d. real rate of interest