Tag: business economics and quantitative methods

Questions Related to business economics and quantitative methods

According to Keynesian model of income determination, an economy's total income in the short run depends on _____________________.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. aggregate demand

  2. aggregate supply

  3. demand

  4. all of the above

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Correct Option: A

A/An _____________ economy is an economy which does not engage in international trade.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. open

  2. developing

  3. closed

  4. developed

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Correct Option: C
Explanation:

A closed economy is one that has no trading activity with outside economies. The closed economy is therefore entirely self-sufficient, which means no imports come into the country and no exports leave the country. The closed economy is self-sufficient, which means no imports come into the country and no exports leave the country. The purpose of a closed economy is to provide domestic consumers with everything they need from within the country's borders.

In the two-sector model, households provide factor services to the firms and receive income in the form of ____________.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. rent

  2. wages

  3. interest and profits

  4. all of the above

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Correct Option: D
Explanation:

In a two sector economy, the household sector renders factor services and is in return rewarded with factor payments by the firms in the form of rent, wages, interest and profits.

In an open economy, ___________ plays an important role.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. government

  2. foreign trade

  3. firms

  4. households

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Correct Option: B
Explanation:

A country that undertakes trade with other countries is termed as an open economy. The open economy is characterised with four sectors, namely, firms, households, government and the foreign sector.

________________________ is the total amount of goods and services demanded in the economy.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. Aggregate demand

  2. Demand

  3. Individual demand

  4. None of the above

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Correct Option: A
Explanation:

Aggregate demand refers to the demand for the final output in the economy, which all the buyers in the economy desire to purchase, backed by sufficient purchasing power at the general price level and the employment level in the economy. 

According to the Keynesian theory of income determination, income and output in the short run depends on aggregate demand.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. True

  2. False

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Correct Option: A

In a two-sector economy model factor income of the households is equal to factor payments by firms.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. True

  2. False

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Correct Option: A
Explanation:

In a two sector economy, the household sector renders factor services and in return receive factor payments from the firms, which includes rent, wages, interest and profits which is regarded as the factor income by the household sector. Thus, factor incomes equal factor payments in a two sector economy.

An open economy is an economy that engages in international trade in goods and services.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. True

  2. False

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Correct Option: A
Explanation:

A country that undertakes trade with other countries, i.e, imports and exports goods and services, is termed as an open economy. The open economy is characterised with four sectors, namely, firms, households, government and the foreign sector.


At the point of equilibrium of firm (under perfect competition) _____________.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. MC curve must be rising

  2. MC curve must be falling

  3. MR cure must be rising

  4. None of the above

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Correct Option: A
Explanation:

A firm is said to be in equilibrium when it maximizes its profit. It is the point when it has no tendency either to increase or contract its output. ... So in order to be in equilibrium, the firm will attempt to maximize the difference between total revenue and total costs.When MC is falling, the cost of producing an additional unit of output tends to decrease. Under perfect competition, when price is constant, the difference between the total revenue and total variable cost tends to increase.

In binomial approach of option pricing model, fourth step is to create ________________.

business economics and quantitative methods introduction to managerial economics theories of employment and income concept of international trade macro economic analysis

  1. equalize domain of payoff

  2. equalize ending price

  3. riskless investment

  4. high risky investment

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Correct Option: C
Explanation:

Binomial option pricing model is a risk-neutral model used to value path-dependent options. Under the binomial model, current value of an option equals the present value of the probability-weighted future payoffs from the options.