Economics · Banking Financial Awareness

Macroeconomics and Policy

2,878 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 concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Lower __________ leads to low savings which lead to a lower rate of capital formation.

  1. per capita income

  2. gross domestic product

  3. development plan

  4. economic instability
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Low per capita income limits the ability of individuals to save, which in turn reduces the pool of funds available for investment and capital formation.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Capital formation is highly affected by market conditions of boom and depression.

  1. True

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

During boom market condition, the economy flourishes,investment rises and thus capital formation rises and during depression period , market sinks down and rate of capital formation falls.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

What does capital formation mean?

  1. The increase in the stock of real capital in a country

  2. The increase in the supply of money in a country

  3. The decrease in the supply of money in a country

  4. The improvement of technological factors
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Capital formation means the net accumulation of stock in a country during a particular accounting period.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Over the years the rate of gross capital formation has _______.

  1. increased

  2. decreased

  3. remained constant

  4. has not shown any specific trend.
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Over the years the rate of accumulation of net capital during a particualar accounting period has increased as the skill and knowledge of labour are increasing day by day ,which in turn is increasing the productive capacity of an economy.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

An increase in income tax adversely affects the willingness to save.

  1. True

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

This statement is true as persons feel demotivated to work hard in order to earn more as because the real income after paying the increased income tax is much less despite the hard work of the individuals .Therefore the willingness to save is also less as the willingness to earn more is less.

Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money

Which of the following is the suggestion to increase the rate of capital formation?

  1. The taxation policy should be revised and adequate tax reliefs should be allowed to salaried persons and industrialists.

  2. Saving schemes like provident fund, compulsory insurance, compulsory deposits, etc., should be encouraged and extended.

  3. The law and order condition in every part of the country should be improved and security of life and property must be ensured

  4. All of these
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Capital formation requires incentivizing savings and ensuring a stable environment for investment. Tax reliefs, structured saving schemes, and a secure legal environment all promote the accumulation of capital.

Multiple choice

The Stock Market crash in 1929 was largely caused by...

  1. the fact that people spent too much money.

  2. the fact that the banks failed.

  3. the fact that people could not repay their debts.

  4. All of these.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The 1929 crash was a culmination of systemic issues, including over-speculation, excessive debt, bank instability, and unsustainable spending habits.

Multiple choice

A change in interest rates is an example of which external factor?

  1. Political

  2. Economic

  3. Technological

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

Interest rates directly affect borrowing costs, consumer spending, and inflation, making them a key economic factor in a PESTEL analysis. They are determined by monetary policy and impact the overall financial environment of a business.

Multiple choice

Which was a contributing factor in causing the Great Depression (before Stock Market crash)?

  1. overproduction and surplus

  2. shortage and famine

  3. inflation and prices rising

  4. 1918 Influenza pandemic
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Overproduction in agriculture and industry led to a surplus of goods that consumers could not afford to buy, causing prices to plummet and businesses to fail. This economic imbalance was a primary structural cause of the Great Depression.

Multiple choice

Which is NOT one of the effects of the Great Depression?

  1. People lose jobs

  2. Herbert Hoover is praised as president

  3. Banks fail

  4. Changes in government
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Herbert Hoover was widely blamed for the severity of the Great Depression, and his perceived inaction led to his defeat in the 1932 election. He was not praised for his handling of the crisis.

Multiple choice

Which of the following had been responsible for the heavy burden of the deal and its interest?

  1. BOP surplus

  2. BOP deficit

  3. Equilibrium

  4. None of these
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The Balance of Payments (BOP) deficit creates a heavy debt burden because countries must borrow to cover the excess of imports/payments over exports/receipts. This debt accumulates with compound interest, creating long-term economic strain. A BOP surplus would not create such a burden.

Multiple choice organization of commerce and management entrepreneurship: an introduction, nature, importance and problems functions and role of an entrepreneur entrepreneurs types of entrepreneurs

What measures the percentage increase in capital formation required  for obtaining a percentage increase in GDP?

  1. Liquidity ratio

  2. Incremental capital output ratio

  3. Financial leverage ratio

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

Incremental capital output ratio measures the marginal amount of investment capital needed to generate a next unit of production.

Incremental capital output ratio= Annual Investment/Annual increase in GDP.