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Economic Environment Quiz-2

Please tick the right choice and make your choice visible in the column provided next to each question.
Maximum permitted time: 13 minutes

1. Among the four sub-components of consumption expenditure arranged in random order starting
from durable goods(A), choose the pattern which you believe is highly cyclical component
ending up in the component with lowest cyclicality.
A) Durable goods B) Non-durable goods C) Semi- Durable Goods D) Services
4
1) ABDC 2) BADC 3) ABCD 4) ACBD

2. If the marginal propensity to consume for an agriculture worker is 0.7 and for a professor is
0.5, the MPS of the professor implies that
A) The MPS of the professor is 0.5
B) The professor saves more than the agriculture worker with the availability of an extra rupee. D
C) Any change in income to boost consumption growth will not have much impact from the
professor as compared to the agriculture workers.
D) All of the above is true

3. Which is not a part of current account in the external sector D

A) Imports of goods and services
B) Remittances
C) Net factor income from abroad
D) Net NRI deposit
4. Which among these options will affect domestic country’s import decisions negatively
A) A positive surge in the domestic income in the domestic country
B) Exchange rate of domestic country has depreciated to dollar B
C) A new trade policy with neighbouring countries waving off tariffs /quotas of most of goods
and services like RCEP
D) Both A&B
5. When the prices are fixed for simplicity in the short run, the firms if make a wrong analysis of
assuming lower aggregate spending capacity of the economy, can correct themselves if they find
the following signals
A) Firms find that the aggregate expenditure spending is more than the potential expenditure
spending during the quarter
B) If the unplanned inventories will be facing a negative growth (inventories are fast depleting)
C) If the planned investment the firms decide to make has remained the same through the D
quarter
D) Both A & B
 6. Imagine a situation where the aggregate expenditure has fallen, and the new equilibrium output
is 9000 million INR and it is imperative for the firms to produce at the full employment level of
12000 million INR. If the MPC of the economy is 0.7 calculate the multiplier and the initial value
of fiscal stimulus should be respectively
A) 3.33 and 900.90 million of fiscal stimulus
B) 1.42 and 2112 million of fiscal stimulus A
C) 5 and 600 million of fiscal stimulus
D) None of the above
7. Aggregate demand is
A) locus of all equilibrium points of actual aggregate expenditure curve meeting planned
expenditure curve when prices are changed
B) Downward sloping line expressing the quantity demanded in an economy at various prices D
C) It provides the equilibrium points of actual aggregate expenditure curve meeting planned
expenditure curve when determinants of the components of AD are changing, shifting AE
curve
D) A&B are correct
8. Calculate the number of people who are employed and unemployed using the information
provided
If the Working age population is 400 million and the labour force participation is 50% in the country,
the employment rate is 92%.
A) 184 million and 16 million respectively
B) 368 million and 32 million respectively A
C) 200 million and 20 million respectively
D) None of the above
9. Shifts in aggregate demand will not happen if
A) Monetary policy and fiscal policy changes B
B) Price level in the economy changes
C) If expected income and expected profitability increases/decreases
D) Real exchange rate depreciates
10. Aggregate supply in short run changes with prices and upward sloping because
A) Firms can increase the total revenue by increasing output produced
B) There is no upper ceiling on the output prices as the increased price level is an indication
of the increased demand D
C) Factor payments are sticky in the short run keeping the total cost of the firms under check.
D) All of the above is true