Tag: open economy macroeconomics

Quizzes (4) Questions (48)

Questions Related to open economy macroeconomics

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

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

  1. supply

  2. demand

  3. both (a) and (b)

  4. neither (a) nor (b)
Reveal answer Fill a bubble to check yourself
B Correct answer
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.

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

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

  1. income multiplier

  2. output multiplier

  3. employment multiplier

  4. money supply multiplier
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The output multiplier represents the ratio of the change in equilibrium output to the change in autonomous expenditure. It measures how much total output increases for a given increase in spending.

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

Coefficient of correlation will be always ______________.

  1. More than 0

  2. More than-1

  3. Less than-1

  4. Between-1 and + 1
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The Pearson correlation coefficient, denoted by r, measures the strength and direction of a linear relationship between two variables. Its mathematical range is strictly defined as being between -1 and +1 inclusive.

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

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

  1. open economy

  2. closed economy

  3. mixed economy

  4. under developed
Reveal answer Fill a bubble to check yourself
A Correct answer
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.

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

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

  1. increase

  2. decrease

  3. remain unchanged

  4. either B or C
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Aggregate demand is the total demand for goods and services in an economy. Since government expenditure is a component of aggregate demand (AD = C + I + G + NX), an increase in government spending directly increases the total aggregate demand.

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

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.

  1. paradox of savings

  2. paradox of income function

  3. paradox of thrift

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

The paradox of thrift is a concept in Keynesian economics which states that while individual saving is a virtue, if everyone tries to save more during a recession, aggregate demand falls, leading to lower income and ultimately lower total savings.

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

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

  1. I and II are correct

  2. II and IV are correct

  3. I, II and III are correct

  4. All are correct
Reveal answer Fill a bubble to check yourself
D Correct answer
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.  

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

What are 'open market operations'?

  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
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

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

Which of the following defines balanced growth?

  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
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

Balanced growth in the context of the balanced budget multiplier refers to the effect on national income when government expenditure and tax revenue are increased by the same amount, which typically results in an increase in national income equal to the change in expenditure.

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

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

  1. True

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

According to Keynesian theory, the level of output and employment in an economy is determined by the total amount of spending, known as effective demand, which is the point where aggregate demand equals aggregate supply.