Macroeconomics, Theories and Policies 2 MCQs and Notes

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📊 Macroeconomics, Theories and Policies 2
Q. Why does a temporary decrease in government purchases decrease labour supply in the classical model?
  • (A) the fall in government spending decreases labour demand, decreasing the real wage, and so people decrease their labour supply.
  • (B) the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth.
  • (C) people prefer to work less when the government is doing less for them.
  • (D) decreased government purchases make people worse off, so they work less hours.
💬 Discuss
✅ Correct Answer: (B) the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth.
📊 Macroeconomics, Theories and Policies 2
Q. According to the basic classical model, an increase in the money supply will cause
  • (A) employment to increase.
  • (B) the price level to increase.
  • (C) output to increase.
  • (D) investment to increase.
💬 Discuss
✅ Correct Answer: (B) the price level to increase.
📊 Macroeconomics, Theories and Policies 2
Q. Demand-side unemployment is partly caused by:
  • (A) imperfections in the labour market
  • (B) occupational and geographic immobility of factors
  • (C) demographic changes
  • (D) a lack of aggregate demand
💬 Discuss
✅ Correct Answer: (D) a lack of aggregate demand
📊 Macroeconomics, Theories and Policies 2
Q. When there are vacancies in the job-market, but also high levels of unemployment, then we could say that this unemployment is?
  • (A) cyclical
  • (B) regional
  • (C) seasonal
  • (D) structural
💬 Discuss
✅ Correct Answer: (D) structural
📊 Macroeconomics, Theories and Policies 2
Q. Suppose that the money stock is $10 billion, each dollar generates $ 5worth of spending, and the NAIRU is 7%. According to the quantity theory of what is nominal GDP (income)
  • (A) $ 350 million
  • (B) $ 70 million
  • (C) $ 35 million
  • (D) $ 50 million
💬 Discuss
✅ Correct Answer: (D) $ 50 million
📊 Macroeconomics, Theories and Policies 2
Q. The economist who proposed that,” inflation is always and every where monetary phenomenon”was
  • (A) j. m keynes
  • (B) john r hicks
  • (C) milton friedman
  • (D) franco modigliani
💬 Discuss
✅ Correct Answer: (C) milton friedman
📊 Macroeconomics, Theories and Policies 2
Q. According to monetary approach a revaluation of a nation’s currency
  • (A) increase the nation’s demand for money
  • (B) increase the nation’s supply of money
  • (C) reduces the nation’s demand for money
  • (D) reduces the nation’s supply of money
💬 Discuss
✅ Correct Answer: (C) reduces the nation’s demand for money
📊 Macroeconomics, Theories and Policies 2
Q. According to monetarists, money supply constitutes
  • (A) currency+ demand deposits
  • (B) currency +demand deposits+time deposits
  • (C) currency + demand deposits + equity shares
  • (D) currency + all kinds of banks + deposits with other institutions + borrowing
💬 Discuss
✅ Correct Answer: (B) currency +demand deposits+time deposits
📊 Macroeconomics, Theories and Policies 2
Q. Which of the following is true with respect to the monetary approach to the balance of payments?
  • (A) it views the balance of payments as an essentially monetary phenomenon
  • (B) a balance of payments deficit results from an excess demand of money in the nation
  • (C) a balance of payments surplus results from an excess supply of money
  • (D) balance of payments disequilibrium are not automatically corrected in the long run
💬 Discuss
✅ Correct Answer: (A) it views the balance of payments as an essentially monetary phenomenon

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