MCQs on Introduction to Macroeconomics

Macroeconomics is a branch of economics that deals with the structure, performance and behaviour of the overall economy. It focuses on areas like inflation, economic growth rate, price levels of various goods and services, gross domestic product (GDP), national income and the unemployment rate in a particular country. The study of macroeconomics is essential to understand the economic performance of a nation and the factors that affect it.

Below is a list of multiple-choice questions and answers on Introduction to Macroeconomics to help students understand the topic better.

  1. Which of the following is defined as the study of individual units in an economy?
    1. Microeconomics
    2. Macroeconomics
    3. Income and employment theory
    4. None of the above
  2. Answer: b

  3. What would be the overall effect on aggregate output if there is an increase in the planned investment spending?
    1. The aggregate output will increase by an amount that is less than the change in investment spending
    2. The aggregate output will increase by an amount that is greater than the change in investment spending
    3. The aggregate output will increase by an amount that is equal to the change in investment spending
    4. The aggregate output will decrease by an amount that is less than the change in investment spending
  4. Answer: c

  5. Which of the following is the reason for the downward shape of the production possibility curve?
    1. Opportunity cost is negative
    2. Opportunity cost is increasing
    3. Opportunity cost is decreasing
    4. None of the above
  6. Answer: c

  7. Which of the following statements gives a true picture of the central problem of an economy?
    1. How to produce
    2. How to distribute the produced goods
    3. What to produce
    4. All of the above
  8. Answer: d

  9. Which of the following statements is accurate about the free market in a nation’s economy?
    1. It is an economy with minimal intervention from the government in trade and minimal regulations
    2. It is an economy with maximum intervention from the government in trade and maximum regulations
    3. It is an economy with maximum intervention from the government in trade and minimal regulations
    4. It is an economy with minimal intervention from the government in trade and maximum regulations
  10. Answer: a

  11. Which of the following statements is true about a Laissez-Faire economy?
    1. It is a branch of socialism that focuses exclusively on welfare economics
    2. It involves economic transactions between private parties without any intervention from the state or government
    3. It is a term which denotes the economic transactions that are carried out by the state or government
    4. None of the above
  12. Answer: b

  13. Which of the following activities is not included in the calculation of the national income of a country?
    1. A maid working for a family on a full-time basis
    2. A lawyer conducting their law practice
    3. A housewife performing housework chores
    4. A dispensary rendering medical services
  14. Answer: c

  15. Which of the following is the correct meaning of a ‘good’ in economics?
    1. A good is an item that satisfies the needs and wants of customers
    2. A good is an item that looks appealing to the customers
    3. A good is an item that does not look appealing to the customers
    4. None of the above
  16. Answer: a

  17. Which of the following is true about the rate of interest under classical theory?
    1. The rate of interest is based on the demand of investment and the supply of money
    2. The rate of interest is based on the demand of investment and the price level
    3. The rate of interest is based on the demand for capital and the supply of savings
    4. The rate of interest is based on the demand for money and the supply of money
  18. Answer: c

  19. Which of the following statements is accurate about the two-sector economy?
    1. The two-sector economy consists of firms and the government
    2. The two-sector economy consists of firms and foreign sector
    3. The two-sector economy consists of households and government
    4. The two-sector economy consists of households and firms
  20. Answer: d

  21. Which of the following statements is accurate about the relation between indirect taxes and subsidies?
    1. If the factor cost is greater than the market price, then indirect taxes are less than subsidies
    2. If the factor cost is greater than the market price, then indirect taxes are greater than subsidies
    3. If the factor cost is greater than the market price, then indirect taxes are equal to subsidies
    4. None of the above
  22. Answer: a

  23. Which of the following measures are adopted to take care of inflation in an economy?
    1. Decrease in transfer payments along with a reduction in taxation
    2. Increase in transfer payments along with an increase in taxation
    3. Decrease in government expenditure along with an increase in taxation
    4. Increase in government expenditure along with a decrease in taxation
  24. Answer: c

  25. Which of the following methods must be adopted to tackle the problem of recession within an economy?
    1. Reduce the public borrowing and increase taxation
    2. Increase the public borrowing and reduce taxation
    3. Reduce the spending on government welfare projects and increase taxation
    4. Increase the spending on government welfare projects and reduce taxation
  26. Answer: d

  27. Which of the following statements are true about the study of macroeconomics?
    1. It is a study of economics that deals with households, government, firms and demand-supply
    2. It is a study of economics that deals with households, government, firms and the external sector
    3. It is a study of economics that deals with price levels, profit, expenditure and cost
    4. None of the above
  28. Answer: b

  29. Which of the following statements reflects the true meaning of gross investment?
    1. Gross investment is the total of net investment and depreciation
    2. Gross investment is the difference between the net investment and depreciation
    3. Both a and b are correct
    4. Both a and b are incorrect
  30. Answer: a

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