Tag: public debt

Questions Related to public debt

Excess demand generates greater employment opportunities in the economy.

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

  1. True

  2. False

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Correct Option: B
Explanation:

Excess demand is a situation when there is no possibility of greater employment opportunities as economy is already at full employment level.

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

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

  1. Net Exports

  2. Government Expenditure

  3. Consumption

  4. Both (a) and (b)

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Correct Option: A
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.

Which of these is a component of Aggregate demand ______________.

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

  1. Private consumption expenditure

  2. Investment expenditure

  3. Government expenditure

  4. All of these

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Correct Option: D
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)

The deflationary gap can be corrected by raising the level of aggregate demand.

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

  1. True

  2. False

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Correct Option: A
Explanation:

The deflationary gap can be corrected by raising the level of aggregate demand because deflationary gap occurs when aggregate demand falls shod of aggregate supply.

Aggregate demand can be increased by _______________.

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

  1. Increasing bank rate

  2. Selling government securities by Reserve Bank of India

  3. Increasing cash reserve ratio

  4. None of the above

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Correct Option: D
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.

Demand curve slopes upwards from left to right.

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

  1. True

  2. False

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Correct Option: B
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. 

Desire means demand.

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

  1. True

  2. False

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Correct Option: B
Explanation:

False. Demand is a desire to buy commodity backed by the ability to pay and willingness to buy a commodity.

The equilibrium is the state when _________.

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

  1. demand equals supply

  2. demand is more than supply

  3. demand is less than supply

  4. supply is less than demand

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Correct Option: A
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. 

Market equilibrium of a commodity is determined by ________.

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

  1. balancing of demand and supply position

  2. aggregate demand

  3. aggregate supply

  4. government intervention

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Correct Option: A
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. 

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

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

  1. True

  2. False

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Correct Option: B
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.