Economics MCQs

Page No. 274

The liquidity trap occurs when the demand for money ?


a Is perfectly interest elastic

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b Is perfectly interest inelastic

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

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

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The difference between goes investment and net investment is ?


aDepreciation

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bAcceleration

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c Declaration

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dCapital investment

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View Answer Declaration

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


a Government policy

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b Expectations

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cNational income

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dHistoric trends

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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

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

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

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d The cost of borrowing equals the marginal propensity to consume

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The accelerator assumes ?


a The marginal propensity to consume is constant

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bThe economy is at full employment

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

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dThe multiplier is constant

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An outward shift in the Marginal Efficiency of Capital should ?


a Decrease consumption

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b Increase aggregate demand

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cReduce aggregate supply

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d Slow economic growth

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The marginal propensity to consume is equal to ?


a Total spending / total consumption

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b Total consumption / total income

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cchange in consumption / change in income

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dChange in consumption / change in savings

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Lower interest rates are likely to ?


aDecrease consumption

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b increase cost of borrowing

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cEncourage saving

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dIncrease spending

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As income increase ?


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

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

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cThe average propensity to consume falls

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dThe average propensity to consume always approaches 0

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An increase in the marginal propensity to consume will ?


aincrease the size of the multiplier

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bIncrease the marginal propensity to save

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cDecrease national income

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dReduce injections into the economy

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