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Multiple choice economics income-output determination public debt public debt main feature of tax

Which of the following is not a component of aggregate demand in a two-sector economy?

  1. Net Exports

  2. Government Expenditure

  3. Consumption

  4. Both (a) and (b)
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

The aggregate demand in two sector economy only includes the expenditure made by the consumer sector and the producer sector. The expenditure by the government sector and net exports are not included in the two sector economy.

Multiple choice economics income-output determination public debt public debt main feature of tax

Which of these is a component of Aggregate demand ______________.

  1. Private consumption expenditure

  2. Investment expenditure

  3. Government expenditure

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

The various components of expenditure method are: 

National income by expenditure method = C+I+G+ (X-M) where

C= Private Consumption expenditure by households 

I=  Gross Domestic Investment expenditure

G= Government Final consumption and investment expenditure

(X-M)= Net export ( Export - Import)

Multiple choice economics income-output determination public debt public debt main feature of tax

Aggregate demand can be increased by _______________.

  1. Increasing bank rate

  2. Selling government securities by Reserve Bank of India

  3. Increasing cash reserve ratio

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

Aggregate demand refers to the sum total of expenditure that the people plan to incur on the purchase of goods and services produced in an economy corresponding to their different levels of income. It can be increased when the credit creation capacity of the commercial banks gets increased. By increasing bank rate, selling government securities by RBI and increasing cash reserve ratio decrease the aggregate demand in an economy.

Multiple choice economics income-output determination public debt public debt main feature of tax

Demand curve slopes upwards from left to right.

  1. True

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

False. Demand curve slopes downward from left to right because of the law of diminishing marginal utility. According to this law, the utility/satisfaction of the consumer goes on decreasing with every additional consumption of the commodity and hence, the consumer will buy more goods only when the price decreases. Other reasons are income effect, substitution effect, different uses of commodity etc. 

Multiple choice economics income-output determination public debt public debt main feature of tax

The equilibrium is the state when _________.

  1. demand equals supply

  2. demand is more than supply

  3. demand is less than supply

  4. supply is less than demand
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Market equilibrium is a situation where the aggregate demand and supply of a commodity are the same I.e., equal. Equilibrium is achieved at the intersection of aggregate demand aggregate supply and at that level we get the equilibrium price and quantity. 

Multiple choice economics income-output determination public debt public debt main feature of tax

Market equilibrium of a commodity is determined by ________.

  1. balancing of demand and supply position

  2. aggregate demand

  3. aggregate supply

  4. government intervention
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Market equilibrium is a situation where the aggregate demand and supply of a commodity are the same. Equilibrium is achieved at the intersection of aggregate demand aggregate supply and at that level we get the equilibrium price and quantity. 

Multiple choice economics income-output determination public debt public debt main feature of tax

When demand increases, the demand curve shifts to the left. 

  1. True

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

Demand increases when price remains constant and other factors change.
For example if the income of the consumer increases, his demand will increase as a result the demand curve shifts to the right.
When demand for a good decreases say with the fall in income, the demand curve will shift to the left.