In Keynesian economics, a deflationary gap occurs when aggregate expenditures are:

• A) Less than aggregate production.
• B) Equal to aggregate production.
• C) Greater than aggregate production.
• D) Undetermined.

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

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

Naima has just finished school and is waiting to report to his new job at the beginning of the month. Naima is considered to be:

• A) Cyclically unemployed.
• B) Structurally unemployed.
• C) Employed.
• D) Frictionally unemployed.

The relationship between saving and income is known as the:

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

Final goods are:

• A) For Direct use by the consumers.
• B) For further processing.
• C) Perishable goods only.
• D) Inferior goods only.

The investment demand curve shows the relationship between the levels of:

• A) Investment and interest rate.
• B) Investment and consumption.
• C) Consumption and interest rate.
• D) Investment and saving.

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

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

The theory regarding to the tradeoff between unemployment and inflation is established by:

• A) John Maynard Keynes
• B) Joseph Schumpeter
• C) Milton Friedman
• D) W.A. Phillips

Counting a product more than once in National income measurement is known as:

• A) Double counting.
• B) Counting error.
• C) Statistical error.
• D) Mathematical bias.

The saving function is:

• A) The ratio of a change in planned saving to a change in disposable income.
• B) The level of planned saving at different levels of disposable income.
• C) The level of planned saving for every change in disposable income.
• D) The ratio of total saving to total disposable income.

A reason why some economists basically ignore the short run is because they believe that the economy:

• A) Can only be graphed with a horizontal curve.
• B) Can only be graphed with a vertical curve.
• C) Has self-correcting mechanisms.
• D) Never needs correction.

In Keynesian economics, an inflationary gap results if aggregate expenditures are:

• A) Equal to aggregate production.
• B) Undetermined.
• C) Less than aggregate production.
• D) Greater than aggregate production.

The most commonly used index to calculate the inflation is:

• A) Producer Price Index (PPI)
• B) Consumer Price Index (CPI)
• C) GDP Deflator
• D) Wholesale Price Index (WPI)

If the values of nominal Gross Domestic Product (GDP) and GDP deflator in 2019 are Rs. 700,000 and 1.75 respectively, the real GDP in this year is:

• A) Rs. 600,000
• B) Rs. 500,000
• C) Rs. 400,000
• D) Rs. 300,000

Suppose the consumption function is C = 450 + 0.5 Yd. What is marginal propensity to consume?

• A) 0.5
• B) 50
• C) 5
• D) 1.5

A rise in government expenditure leads to a multiple rise in national income due to:

• A) Multiplier effect.
• B) Inelastic demand.
• C) Accelerator.
• D) Inelastic supply.

In case of adaptive expectations the time period is

• A) t+1
• B) t-1
• C) t-1/t+1
• D) t/1

------------- is an accounting record of a country’s transactions with rest of the world.

• A) Rate of inflation
• B) Balance of trade
• C) Trade liberalization
• D) Balance of payment

Which of the following events shifts the short-run aggregate supply curve to the right?

• A) An increase in price expectations
• B) A drop in oil prices
• C) An increase in government spending on military equipment
• D) A decrease in the money supply

Suppose the consumption function is C = 200 + 0.6 Yd. If the value of disposable income is Rs. 10000 then total consumption equals:

• A) Rs. 5800.
• B) Rs. 6000.
• C) Rs. 6200.
• D) Rs. 6400.