The terms “Micro Economics” and “Macro Economics” were coined by
(a) Alfred Marshall
(b) Ragner Nurkse
(c) Ragner Frisch
(d) J.M. Keynes
Solution: (c)
The terms microeconomics and macroeconomics were coined by Professor Ragnar Frisch of Oslo University for the first time in 1933 and since then they gained popularity and were widely used by other economists. Now they have become an integral part of economic terminology. Ragnar Anton Kittil Frisch was a Norwegian economist and the co-winner with Jan Tinbergen of the first Nobel Memorial Prize in Economic Sciences in 1969. Frisch was one of the founders of economics as a modern science. He made a number of significant advances in the field of economics and coined a number of new words.
An individual’s actual standard of living can be assessed by
(a) Gross National Income
(b) Net National Income
(c) Per Capita Income
(d) Disposable Personal Income
Solution: (c)
The standard of living is a measure of the material welfare of the inhabitants of a country. The baseline measure of the standard of living is real national output per head of population or real GDP per capita. This is the value of national output divided by the resident population. Other things being equal, a sustained increase in real GDP increases a nation’s standard of living providing that output rises faster than the total population.
The total value of goods and services produced in a country during a given period is
(a) Disposable income
(b) National income
(c) Per capita income
(d) Net national income
Solution: (b)
National income is the total value a country’s final output of all new goods and services produced in one year. Understanding how national income is created is the starting point for macroeconomics.
‘Personal Income’ equals
(a) The household sector’s income
(b) Private income minus savings of the corporate sector minus corporation tax
(c) Personal disposable income plus miscellaneous receipts of the Government
(d) All of the above
Solution: (3)
Disposable income is total personal income minus personal current taxes (or plus receipts of the government). In national accounts definitions, personal income, minus personal current taxes equals disposable personal income. Subtracting personal outlays (which includes the major category of personal (or, private) consumption expenditure) yields personal (or, private) savings.
Which one of the following items is included in the national income account?
(a) Services of housewives
(b) Income of smugglers
(c) Services of Sadhus
(d) Services of night-watchmen
Solution: (d)
National income is the total value a country’s final output of all new goods and services produced in one year. Services provided by housewives, income of smugglers and services of sadhus can be categorized as non-economic services and thus cannot be accounted.
Speculative demand for cash is determined by
(a) The rate of interest
(b) the level of income
(c) the general price level
(d) the market conditions
Solution: (a)
Speculative demand is the demand for financial assets, such as securities, money or foreign currency that is not dictated by real transactions such as trade, or financing. The assets demand for money is inversely related to the market interest rate. This is because at lower interest rate, more people will expect a rise in interest rate (or a fall in bond prices).
Depreciation is equal to —
(a) Gross national product — Net national product
(b) Net national product — Gross national product
(c) Gross national product — Personal income
(d) Personal income — Personal taxes
Solution: (a)
Net national product at market price is the market value of the output of final goods and services produced at current price in one year of a country. If we subtract the depreciation charges from the gross national product, we get net national product at market price. So depreciation = Gross National ProductNet National Product.
National Income include :
(a) Financial help to earthquake victims
(b) Pocket money of a child
(c) Winning of a lottery prize
(d) Construction of a new house
Solution: (d)
National income is the total value a country’s final output of all new goods and services produced in one year. So construction of a new house is certainly output of goods. Transfer payments are not a part of the national income. So private sector transfers including charitable donations and prizes to lottery winners are excluded from it.
A rising Per Capita Income will indicate a better welfare if it is accompanied by
(a) unchanged Income distribution overall.
(b) changed Income distribution in favour of rich.
(c) changed Income distribution in favour of poor.
(d) changed Income distribution in favour of Industrial Labour
Solution: (c)
Per capita income has lately been viewed as a better determinant of economic development and welfare. However, high inequality can still diminish economic growth. So equal or more rationale distribution of income in the favour of the poor is the best way to ensure that the welfare is holistic and leaves no quarters deprived as after all, economic welfare is a part and parcel of social welfare.
‘Hire and Fire’ is the policy of
(a) Capitalism
(b) Socialism
(c) Mixed Economy
(d) Traditional Economy
Solution: (c)
In capitalism, people may sell or lend their property, and other people may buy or borrow them. In many countries with mixed economies (part capitalism and part socialism) there are laws about what we can buy or sell, or what prices we can charge, or whom we can hire or fire.
