Economics · Banking Financial Awareness

Macroeconomics and Policy

2,833 Questions

Macroeconomics and policy questions assess the understanding of broad economic indicators, government fiscal strategies, and banking regulations. Topics include inflation causes, currency exchange rates, monetary policy tools, and historical economic systems. These are highly tested in banking and civil services examinations.

Inflation FactorsMonetary PolicyExchange RatesFiscal PolicyEconomic IndicatorsBretton Woods System

Macroeconomics and Policy Questions

Multiple choice economics income-output determination public debt public debt main feature of tax

The relationship between rate of interest and investment demand is ___________.

  1. direct

  2. inverse

  3. constant

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Marginal efficiency of investment (MEI) refers to the expected rate of return from the allocation of a proportion of income or capital invested in the business. There is a inverse relation between the rate of interest and investment. If the rate of interest is high then people will take less loan from the bank and they will have less money to invest in whereas if rate of interest is low then people will take more loan from the bank to invest in the business. 

Multiple choice economics public debt public debt main feature of tax arbitration, tribunal adjudication and alternate dispute resolution

Public debt produces a deep impact on production of wealth in the country. As against this, private debt produces no such impact.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Public debt is often used for infrastructure and development, which impacts the production of wealth, whereas private debt is typically for consumption or specific business ventures.

Multiple choice economics public debt public debt main feature of tax arbitration, tribunal adjudication and alternate dispute resolution

Which of the following is most likely to cause an increase in the size of the national debt?

  1. An increase in taxation

  2. A rise in long-term government borrowings

  3. An increase in national income

  4. A reduction in government expenditure.
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

National debt increases when the government spends more than it earns, which is facilitated by long-term government borrowings.

Multiple choice geography state of industries in india meaning and classification of industries industrialisation and urbanisation urbanisation

Inflation caused by increased ____________.

  1. Cost-push

  2. Structural inflation

  3. Stagnation

  4. Demand pull inflation
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Cost push inflation is inflation caused by an increase in prices of inputs like labour, raw material, etc. The increased price of the factors of production leads to a decreased supply of these goods .Demand-pull inflation is the  most  common cause of rising prices. It occurs when consumer demand for goods and services increases so much that it outstrips supply. Producers can't make enough to meet demand. They may not have time to build the manufacturing needed to boost supply.

Multiple choice economics employment: growth, informalisation and other issues unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

When the aggregate spending is not sufficient to produce that level of output which requires full employment of the available resources, it results in ______________.

  1. inflation

  2. unemployment

  3. social problems

  4. none of the above
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

When the aggregate spending is not sufficient to produce an adequate level of output which requires full employment of available resources then it means aggregate demand is less than aggregate supply, then the planned inventory rises above the desired level. To clear the unwanted increase in inventory, firms plan to reduce the output which reduces the employment in the economy. 

Multiple choice economics employment: growth, informalisation and other issues unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Excessive aggregate spending leads to full employment level of output accompanied with ____________.

  1. lower income level

  2. poverty

  3. inflation

  4. none of the above
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

When the aggregate spending is excessive then it leads to output which has full employment of available resources then it means aggregate demand is more than aggregate supply, then the planned inventory would fall below the desired level. To bring back the Inventory at the desired level, the producers expand the output but due to full employment of the available resources the output remains the same which leads to inflation in the economy.

Multiple choice economics income determination unemployment and employment generation the short run fixed price analysis of the product market liquidity preference and profit

Saving increases with increase in income.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

According to the consumption function, as income rises, saving typically increases because the marginal propensity to save is positive. Households save a portion of additional income. While the relationship may not be strictly linear at very high income levels (the savings rate can plateau), the general principle that higher income leads to higher savings is well-established in economics.

Multiple choice economics economics of development and planning economics of planning objectives of economic planning in india major economic problems

As we read these days, many world economies are passing through the recession at present. When can an economy be "in a recession"?
A) When a decline occurs in almost all major economic activities.
B) When the inflation reaches a very high rate or becomes double-digit inflation.
C) When big financial scams and Frauds start taking place.

  1. Only A

  2. Only B

  3. Only C

  4. All the three
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

As we read these days, many world economies are passing through the recession at present. An economy is said to be in a recession when a decline occurs in almost all major economic activities.  Also, it is generally identified by a fall in GDP in two successive quarters.

Thus, the correct answer is A.

Multiple choice geography economic growth and development development and growth need for sustainable development economics of development

Which of these is an indicator of economic growth?

  1. Sensex

  2. Hardening of currency

  3. GDP growth

  4. Population growth
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

GDP growth is an indicator of economic growth. GDP growth can be defined as the net increase in the market value of all goods and services produced in an economy. GDP growth helps to analyze the economic growth and economic development of a nation.

Multiple choice economics meaning and scope of public finance public finance, budget and fiscal policy government budget and economy public finance and budget

Which of the following is/are the adverse effects of deficit financing ______.

  1. reduction in prices

  2. inflation

  3. inequality

  4. both B and C
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Deficit financing, when excessive, increases the money supply, which leads to inflation. It can also exacerbate economic inequality by disproportionately affecting those with fixed incomes while benefiting asset holders.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

Which of these is/are not a function of money?

  1. Hedges against inflation.

  2. Unit of measurement.

  3. Medium of exchanges.

  4. Measurement of value.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The primary functions of money are medium of exchange, unit of account, and store of value. Hedging against inflation is a strategy for managing assets, not a function of money itself.

Multiple choice economics theories of distribution liquidity preference and profit revenue and revenue curves simple monopoly and commodity market

_________ affects the demand for money.

  1. Real income

  2. Price level

  3. Rate of interest

  4. All the three
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The following variables affects the demand for money: 

1. Real income: It refers to the income which is used for consumption of commodities in the market. If it is high, then the demand for money will also be high and if it is low then the demand for money will also be low. 
2. Price level: If the general price level in the economy for all the commodities are high as in the case of inflation, then demand for money will be more as now more money will be required to purchase the same set of commodities and if the general price level in the economy for all the commodities are low as in the case of deflation, then demand for money will be less  as now less money will be required to purchase the same set of commodities.
3. Rate of interest: Rate of interest is the rate charged on the loans offered by the commercial banks to the people with or without any collateral. If rate of interest is high then it will decrease the real income with the people as a result of which purchasing power would be decreased which will decrease the demand for money in the economy and if rate of interest is low then it will increase the real income with the people as a result of which purchasing power would be increased which will increase the demand for money in the economy.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which of the following is not a function of money?

  1. It is a medium of exchange

  2. It has general acceptability

  3. It is a standard measure of value

  4. It is hedge against inflation
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The primary functions of money are medium of exchange, unit of account, and store of value. While money can be used to hedge against inflation, this is not a fundamental definition or function of money itself.

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

The speculative motive relates to the desire of the people to hold cash in order to take advantage of market movements regarding the future changes in the price of bonds and securities in the capital market.

  1. True

  2. False
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The speculative motive relates to the motive of the public to hold cash in their hand in order to take advantages of the market actions and movement in the future where they can influence the future change in the price of bonds and securities in the capital market. 

Multiple choice economics theories of distribution functions of money value, nature and functions of money liquidity preference and profit

Which one of the following is the most important determinant of speculative demand for money?

  1. Income

  2. Interest rate

  3. Profits

  4. Prices
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The demand for money for speculative purposes in order to undertake investments for future returns is based upon the rate of interest prevailing in the economy. It is algebraically expressed in the form of a function as:  $S _{m}=f(r)$.