Gross National Product (GNP) is:

• A) Gross Domestic Product (GDP) minus depreciation.
• B) Income from foreign investments.
• C) National income discounted by the GDP deflator.
• D) Net National Product (NNP) plus depreciation.

According to the quantity theory of money, which of the following is TRUE for the equation MV = PQ?

• A) P rises as V falls, other things constant
• B) M has no effect on the price level
• C) M is nominal money supply
• D) Q is the real output level

Rising inflation means that price level is rising at a(n):

• A) Constant Rate.
• B) Decreasing rate.
• C) Fluctuating rate.
• D) Increasing rate.

The relationship between saving and income is known as the:

• A) Consumption function.
• B) Disposable income.
• C) Saving function.
• D) 45-degree line.

According to Keynes inflation is the result of

• A) Excessive Supply
• B) Excessive Demand
• C) Low level of pricing
• D) Alternative Absolution

In Keynesian economics, if aggregate expenditures are less than aggregate output then:

• A) Aggregate output increases.
• B) Inventories decrease.
• C) Employment decreases.
• D) The price level rises.

The principle that states that a change in investment causes a magnified change in income is termed as the:

• A) Multiplier effect.
• B) Water paradox.
• C) Saving theorem.
• D) Paradox of thrift.

Quantity theory of money MV=PQ, shows the positive relationship among:

• A) Overall prices to quantity of money
• B) Nominal value of expenditures to demand of money
• C) Demand of money and supply of money
• D) None of the given options is true

Suppose marginal propensity to consume is 0.8 and government expenditures increase by Rs.1000. The multiplier is equal to:

• A) 1000/(1+0.8)
• B) 1/(1+0.8)
• C) 1/(1-0.8)
• D) 1000/(1-0.8)

If Aggregate expenditures are more than aggregate production then their will be:

• A) Inflationary gap in economy.
• B) Deflationary gap in economy.
• C) Dynamic gap in economy.
• D) Output gap in economy.

Unemployment benefits may increase the unemployment rate because unemployment benefits:

• A) Reduce the cost of job search.
• B) Reduce the benefits of additional job searching.
• C) Enable people to quit searching for work.
• D) Encourage people to quit their jobs.

Which of the following is leakage into circular flow of income?

• A) Government spending
• B) Exports
• C) Investment
• D) Saving

In the complete classical model, a rightward shift of the labor supply curve will:

• A) Decrease the nominal wage and increase the price leve.
• B) Increase both the price level and the nominal wage.
• C) Decrease the price level and increase the nominal wage.
• D) Decrease both the price level and the nominal wage.

Suppose level of investment in the economy is Rs.500, 000 and the change in output equals Rs.80, 000. The value of accelerator is:

• A) 1.72.
• B) 6.25.
• C) 0.16.
• D) 0.85.

The relationship between consumer spending and income is known as the:

• A) Investment function.
• B) Consumption function.
• C) 45-degree line.
• D) Consumer price index.

When too much money, chases too few goods, the resulting inflation is called

• A) Demand Pull Inflation
• B) Stagflation
• C) Deflation
• D) Cost Push Inflation

"Index-linking" is very common in

• A) Latin America
• B) Australia
• C) USA
• D) South Asia

Market price include:

• A) Factor price + Direct taxes
• B) Factor price + Indirect taxes
• C) Factor price - Direct taxes
• D) Factor price - Indirect taxes

Consider a closed economy where total savings equals Rs. 80000, investment is Rs. 90000 and total government spendings is Rs. 55000. What are injections into the circular flow of income?

• A) Rs.225, 000
• B) Rs.145, 000
• C) Rs.170, 000
• D) Rs.135, 000

Unemployment benefits reduce the cost of job search, this may:

• A) Leads to higher inflation.
• B) Increase the output in country.
• C) Decrease the unemployment rate.
• D) Increase the unemployment rate.