Economics MCQs

Page No. 274

The liquidity trap occurs when the demand for money ?


a Is perfectly interest elastic


b Is perfectly interest inelastic


cMeans that an increase in money supply leads to a fall in the interest rate


dMeans that an increases in the money supply leads to an increases in the interest rate



The difference between goes investment and net investment is ?


aDepreciation


bAcceleration


c Declaration


dCapital investment


View Answer Declaration

Investment is a unstable element of aggregate demand because it depends heavily on ?


a Government policy


b Expectations


cNational income


dHistoric trends


View Answer Government policy

A profit maximising firm will invest up to the level of investment where ?


aThe cost of borrowing equals the marginal efficiency of capital


bThe cost of borrowing is greater than the marginal efficiency of capital


cThe cost of borrowing is less then the marginal efficiency of capital


d The cost of borrowing equals the marginal propensity to consume



The accelerator assumes ?


a The marginal propensity to consume is constant


bThe economy is at full employment


cThere is a constant relationship between net investment and the rate of change of output


dThe multiplier is constant



An outward shift in the Marginal Efficiency of Capital should ?


a Decrease consumption


b Increase aggregate demand


cReduce aggregate supply


d Slow economic growth



The marginal propensity to consume is equal to ?


a Total spending / total consumption


b Total consumption / total income


cchange in consumption / change in income


dChange in consumption / change in savings



Lower interest rates are likely to ?


aDecrease consumption


b increase cost of borrowing


cEncourage saving


dIncrease spending



As income increase ?


aThe average propensity to consume gets nearer in value of the marginal propensity to consume


bThe average propensity to consume diverges in value from the marginal propensity to consume


cThe average propensity to consume falls


dThe average propensity to consume always approaches 0



An increase in the marginal propensity to consume will ?


aincrease the size of the multiplier


bIncrease the marginal propensity to save


cDecrease national income


dReduce injections into the economy



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