Tag: liquidity preference and profit

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Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

 ______ refers to the situation when aggregate supply falls short of aggregate demand corresponding to full employment level of output in the economy.

  1. Deficient Demand

  2. Excess Demand

  3. Inflationary Gap

  4. Deflationary gap
Reveal answer Fill a bubble to check yourself
C Correct answer
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.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Deficient Demand indicates __________________.

  1. Under employment equilibrium

  2. Over Full employment equilibrium

  3. Full employment equilibrium

  4. None of these
Reveal answer Fill a bubble to check yourself
A Correct answer
Explanation

Deficient demand refers to the situation when aggregate demand is short of aggregate supply corresponding to full employment level in the economy. Aggregate supply being perfectly elastic, it converges with aggregate demand at a lower level of output lower than the full employment level of output in the economy. This is a situation of underemployment equilibrium.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

Equilibrium price is determined at the interaction point of demand curve and supply curve.

  1. True

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

Market equilibrium occurs at the price level where the quantity demanded by consumers equals the quantity supplied by producers, which is the intersection of the two curves.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

The law of demand states ______ relation between demand and price.

  1. a direct

  2. an inverse

  3. no

  4. positive
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

The law of demand states that, ceteris paribus, as the price of a good increases, the quantity demanded decreases, and vice versa, representing an inverse relationship.

Multiple choice business economics and quantitative methods equilibrium of a firm shifts in demand and supply producer's equilibrium income-output determination liquidity preference and profit

When price of commodity rise,the demand for it _____ .

  1. rises

  2. falls

  3. remain

  4. constant
Reveal answer Fill a bubble to check yourself
B Correct answer
Explanation

According to the law of demand, there is an inverse relationship between price and quantity demanded; therefore, if the price rises, the quantity demanded falls.