Q. What is the effect of monetary policy in a situation of “Liquidity trap”?
✅ Correct Answer: (D)
monetary policy ineffective
Macroeconomics, Theories and Policies 2 MCQs and Notes
Q. According to Classical what bring full employment in an economy?
✅ Correct Answer: (C)
wage price flexibility
Q. In Classical system how to correct an overproduction or glut in the market?
✅ Correct Answer: (B)
by wage cut policy
Q. According to Says law of market what is the main cause of overproduction?
✅ Correct Answer: (A)
unemployment
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 upon at the time when the bond was issued. Codes :
✅ Correct Answer: (A)
both (a) and (r) are correct, and (r) is the correct explanation of (a).
Q. Speculative demand for money is zero when market rate of interest is
✅ Correct Answer: (A)
more than the ‘critical rate’.
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:
✅ Correct Answer: (C)
(a) is correct, but (r) is incorrect.
Q. The classical model of economic development emphasises
✅ Correct Answer: (C)
both (a) and (b)
Q. According to Milton Friedman Theory of permanent component of consumption-expenditure depends on i. Transitory income alone ii. Transitory and permanent income iii. Permanent income alone iv. Windfall gains Codes :
✅ Correct Answer: (D)
only iii is correct
Q. The classical economists focussed on the role of money as
✅ Correct Answer: (A)
medium of exchange