Business Economics
271. A demand curve which takes the form of horizontal line parallel to quantity axis illustrates elasticity which is:
- Zero
- Infinite
- Greater than one
- Less than one
Correct answer: (D)
Less than one
272. If the quantity of a commodity demanded remains unchanged as its price changes, the coefficient of price elasticity of demand is
- Greater than 1
- Equal to 1
- Less than 1
- Zero
Correct answer: (D)
Zero
273. Real business cycle proponents argue that
- Recessions are caused by movements of output away from the natural rate of output
- Prices and wages are sticky
- Macroeconomics should be based on the same assumptions as microeconomics
- Monetary policy is important in determining recessions
Correct answer: (C)
Macroeconomics should be based on the same assumptions as microeconomics
274. In real business cycle models and new classical models
- Monetary factors are responsible for fluctuations in output and employment
- Changes in unemployment are involuntary
- Markets always clear
- Prices and wages are perfectly flexible
- None of the above
Correct answer: (D)
Prices and wages are perfectly flexible
275. In any efficiency wage model it must be true that
- The marginal benefit of increased efficiency is equal to the marginal cost of higher wages
- Nominal wages are inflexible
- Disequilibrium in the labor market exists
- All of the above
- None of the above
Correct answer: (D)
All of the above
276. The real business cycle theory and the new classical theory agree that
- Business cycles are driven by changes in Aggregate demand
- Expectations are formed rationally
- Imperfect information plays a big role in business cycles
- None of the above
Correct answer: (B)
Expectations are formed rationally
277. According to real business cycle theory an increase in taxes
- Would significantly reduce labor supply, increase employment, and decrease output
- A decline in employment but not in output
- Would significantly reduce labor supply, decrease employment, and decrease output
- No change in output and employment
Correct answer: (C)
Would significantly reduce labor supply, decrease employment, and decrease output
278. New Keynesian theories of efficiency wages imply
- Voluntary unemployment
- Real wage rigidity
- Changes in unemployment represent changes in the natural rate of unemployment
- None of the above
Correct answer: (B)
Real wage rigidity
279. Deductive method
- Moves from general to particular
- Moves from particular to general
- Is based on hypothesis
- Both a and b
Correct answer: (A)
Moves from general to particular
280. If external debt of country rises faster than its interest obligations, it is a case of:
- Dept trap
- Liquidity trap
- Poverty trap
- Export led growth
Correct answer: (A)
Dept trap