Top 150+ Solved Managerial Economics MCQ Questions Answer
Q. According to the partisan theory,
a. Politicians are viewed as working only for their own welfare.
b. There are two parties with flexible goals
c. Moderates and liberals often switch political goals
d. Macroeconomic policy is not a key focus of most politicians
Q. Which of the following statements is(are) correct?
a. Even the earliest political business cycle and partisan models assume that expectations were rational
b. The partisan model of fiscal policy cannot be modified to be consistent with rational expectations
c. The myopic, or short-sighted behaviour of voters is inconsistent with rational expectations
d. The earliest political business cycle models assumed that expectations were always rational, whereas the partisan model assumed that expectations were sometimes irrational.
Q. When automatic fiscal stabilizers are in place, a shock that causes a fall in the kevel of economic activity automatically
a. Results in a decline in the federal budget deficit that lessens the fall in income
b. Results in a rise in the federal deficit that lessens the fall in income
c. Requires the federal government to balance the budget
d. Will lead to a permanent increase in the budget deficit
Q. According to the Keynesian model, the optimal fiscal policy is to
a. Increase cyclical but not structural deficits during a recession
b. Reduce cyclical and structural deficits during a recession
c. Increase structural deficits during a recession
d. Maintain a balanced budget in case of national emergency
Q. Which of the following are the most frequently utilized tools of fiscal policy in the United States?
a. Indirect business taxes
b. Corporate income taxes
c. Inheritance taxes
d. Personal income taxes
Q. Assume that the actual deficit is $150 billion with the economy well below potential output and that the level of economic activity rose to its potential level while tax revenues increased by $50 billion and transfer payments fell by $20 billion. Then, what is the structural deficit?
a. $180 billion
b. $120 billion
c. $220 billion
d. $80 billion
Q. The structural deficit is
a. Directly attributable to the long-run behaviour of the economy
b. Not directly attributable to the cyclical behaviour of the economy
c. The result of permanent decisions policymakers have made about tax rates, the level of government spending, and benefit levels for transfer programs.
d. Both b and c
Q. According to the Keynesians,
a. An easy-fiscal tight-monetary policy reduces the trade deficit, such as what occurred during the 1980s
b. An easy-fiscal tight-monetary policy mix affects the composition of output by encouraging imports of foreign goods and discouraging U.S. exports, as was experienced during the 1980s
c. There was not a link between the rising government budgetary deficit and the rising trade deficit during the mid-1980s
d. Budget deficits and trade deficits should not be a source of concern
Q. During the recession of 2001,
a. There were a number of proposals for tax increases or spending cuts to stir the economy, but the failed due to worries about their effects on the already largedeficit
b. A series of tax cuts were passed, though the only occurred in late 2001
c. All the proposed tax and spending cuts were approved in order to motivate the economy and reduce the large deficit
d. The cyclical deficit increased but the structural deficit remained unchanged
Q. Advocates of the public-choice view argue that elected officials
a. Will always respond to inflation with expansionary policies but will respond to unemployment with restrictive policies
b. Will actively respond to inflation with restrictive policies but are reluctant to respond to unemployment with expansionary policies
c. Will always respond to both inflation and unemployment with expansionary policies
d. None of the above
Q. Which of the following statements are(is) correct?
a. Expansionary monetary policy and expansionary fiscal that leads to budget deficits create low interest rates
b. High interest rates in the first half of the 1980s resulted from falls in the budget deficit under the Reagan administration
c. The best monetary-fiscal policy mix to keep interest rates low would be to raise taxes and raise the money supply
d. The answer depends upon the school of thought used to evaluate the effects of deficit policies
Q. Assuming a simultaneous deduction in income taxes and transfer payments of $50 billion, then aggregate disposable income will
a. be higher than before
b. be lower than before
c. remain constant
d. none of the above
Q. From the net tax function: T=t0+t1Y,where t0<0 and t1>0, it follows that, as income rises
a. average taxes falls and the surplus declines
b. average taxes rises and the deficit increases
c. average taxes falls and the deficit declines
d. average taxes and the deficit do not change
Q. The structural deficit is the deficit that
a. Is composed by of non discretionary spending by the federal government
b. Results from the economy being below is natural rate of output
c. Exists when output is at its natural rate of output
d. Results from temporary tax cuts
Q. In the IS-LM model, an easy monetary in conjunction with a tight fiscal policy
a. Increases exports and decreases imports
b. Decreases exports and increases imports
c. Encourages foreign capital inflows to the U.S.
d. Both b and c