Tag: open economy macroeconomics

Questions Related to open economy macroeconomics

Imports of goods and services raises the _______ of foreign exchange.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. supply

  2. demand

  3. both (a) and (b)

  4. neither (a) nor (b)

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Correct Option: B
Explanation:

Imports of goods and services raises the demand of foreign exchange. It s a component of the demand of foreign exchange because payments for imports are made in foreign exchange only.

The ratio of the total increment in equilibrium value of final goods output to the initial increment in autonomous expenditure is called the _____________.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. income multiplier

  2. output multiplier

  3. employment multiplier

  4. money supply multiplier

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Correct Option: B

Coefficient of correlation will be always ______________.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. More than 0

  2. More than-1

  3. Less than-1

  4. Between-1 and + 1

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Correct Option: D

An economy which has trade relation with rest of the world is called an _______.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. open economy

  2. closed economy

  3. mixed economy

  4. under developed

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Correct Option: A
Explanation:

An open economy is one that operates a domestic sector and an international (foreign) sector and is interdependent. It is open to international trade. The economy will usually consist of 4 sectors, firms households, government and foreign sector when the economy is open.

The aggregate demand in an economy will ____________, if the government expenditure rises.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. increase

  2. decrease

  3. remain unchanged

  4. either B or C

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Correct Option: A

The ____________, states, that if all the individuals in the economy increase the proportion of income they save, the total value of savings in the economy will
not increase, rather it would decrease or remain unchanged.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. paradox of savings

  2. paradox of income function

  3. paradox of thrift

  4. none of the above

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Correct Option: C

The critical elements of macro-economic environment are:
I. Economic system
II. Economic legislation
III. Economic Planning
IV. Economic Policy Statements
Of these:

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. I and II are correct

  2. II and IV are correct

  3. I, II and III are correct

  4. All are correct

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Correct Option: D
Explanation:

For an economy to run smoothly and maintain order, there has to be an economic system that is governed by legislation, and constant planning  is undertaken in order to add new and review existing policies to further develop the economy.  

What are 'open market operations'?

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. Activities of SEBI registered brokers

  2. Selling of currency by the RBI

  3. Selling securities issued by the government

  4. Sale of shares by FIIs

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Correct Option: C
Explanation:

Open market operation is the method that the central bank employs to modify the level of money circulating in the banking system. It does this by selling or buying back government securities. If it wants to contract the money supply it will sell government securities in order to reduce the money available with people in the economy, usually to curb inflationary pressures.

Which of the following defines balanced growth?

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. The state of an economy in which there is a constant relationship between the components of aggregate rational income

  2. The effect upon the national income of equal changes in Government expenditure and revenue

  3. A situation in which the Government planned expenditure equals its expected income

  4. None of the above

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Correct Option: B

The level of income and employment in an economy is determined by the effective demand.

national income identity for open economy open economy macroeconomics determination of income and employment economics

  1. True

  2. False

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Correct Option: A