Tag: income determination

Questions Related to income determination

Government expenditure is undertaken for ___________.

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

  1. consumption purpose

  2. investment purpose

  3. either A or B

  4. neither A nor B

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Correct Option: C
Explanation:

Government expenditure refers to the expenditure made by the government during the period of an accounting year which forms a part of the aggregate demand in the economy which is incurred either for consumption purpose like judiciary system or investment purpose like infrastructural development. 

Import and export are the two sides of ____________.

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

  1. market equilibrium

  2. international trade

  3. global currency valuations

  4. balance of payments

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Correct Option: B
Explanation:

Import and export are the two sides of international trade where import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market. 

The ___________ net earning from foreign trade is added to the national income of the country.

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

  1. positive

  2. negative

  3. constant

  4. total

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Correct Option: A
Explanation:

Import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market. So export is an income for the country whereas import is an expense for the country. Therefore, when export is higher than imports then the net earnings from the trade of a country is positive which in added to the national income of the economy. 

When a country's export is higher than the imports, the net earning from trade is ___________.

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

  1. negative

  2. constant

  3. positive

  4. none of the above

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Correct Option: C
Explanation:

Import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market. So export is an income for the country whereas import is an expense for the country. Therefore, when export is higher than imports then the net earnings from the trade of a country is positive. 

When the net earning from foreign trade is zero, it largely impacts the national income.

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

  1. True

  2. False

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Correct Option: B
Explanation:

Import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market. So export is an income for the country whereas import is an expense for the country. Therefore, when export is equal to imports then the net earnings from the trade of a country is zero which does not impact the national income as the earnings from foreign trade is added to the national income of an economy. 

Net earnings from foreign transactions is symbolically expressed as _____________.

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

  1. $X-M$

  2. $X-I$

  3. $G-M$

  4. $M-X$

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Correct Option: A
Explanation:

Import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market. So export(X) is an income for the country whereas import(M) is an expense for the country. Therefore, the net earnings from the trade of a country is the excess of exports over import which is symbolically expressed as X-M. 

Government expenditure is a component of the ____________ in the economy

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

  1. aggregate supply

  2. aggregate income

  3. aggregate demand

  4. all of the above

Show answer
Correct Option: C
Explanation:

Government expenditure refers to the expenditure made by the government during the period of an accounting year which forms a part of the aggregate demand in the economy which is incurred either for consumption purpose like judiciary system or investment purpose like infrastructural development. 

The income received by a country through exports, in the form of _____________, can be utilized by the country to import required goods and services.

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

  1. domestic currency

  2. foreign currency

  3. SDRs

  4. none of the above

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Correct Option: B
Explanation:

Import refers to purchasing of goods and services from international market in the country and export refers to selling goods and services in the international market. So when foreign currency is received through exports from a certain country it can be utilized in importing the required goods and services from that country. 

The gap by which actual aggregate demand exceeds the aggregate supply required to establish full employment equilibrium is known as ______.

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

  1. Deficient Demand

  2. Deflationary gap

  3. Inflationary Gap

  4. Excess Demand

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Correct Option: C
Explanation:
Inflationary gap is the excess of aggregate demand over and above its level required to maintain full employment equilibrium in the economy. It implies two things-
1) Planned aggregate demand in the economy happens to exceed its full employment level.
2) The level of aggregate demand surpasses the level of aggregate supply even when the available factors are fully utilized.

Effective demand is determined at the point of equality between aggregate demand and aggregate supply. 

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

  1. True

  2. False

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Correct Option: A
Explanation:

The point at which aggregate demand (AD)  is equals aggregate supply (AS) is the point of effective demand  because at this level there is no tendency for income and output to change and the market is entirely clear.