Business Economics

271. A demand curve which takes the form of horizontal line parallel to quantity axis illustrates elasticity which is:

  1. Zero
  2. Infinite
  3. Greater than one
  4. 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

  1. Greater than 1
  2. Equal to 1
  3. Less than 1
  4. Zero
Correct answer: (D)
Zero

273. Real business cycle proponents argue that

  1. Recessions are caused by movements of output away from the natural rate of output
  2. Prices and wages are sticky
  3. Macroeconomics should be based on the same assumptions as microeconomics
  4. 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

  1. Monetary factors are responsible for fluctuations in output and employment
  2. Changes in unemployment are involuntary
  3. Markets always clear
  4. Prices and wages are perfectly flexible
  5. None of the above
Correct answer: (D)
Prices and wages are perfectly flexible

275. In any efficiency wage model it must be true that

  1. The marginal benefit of increased efficiency is equal to the marginal cost of higher wages
  2. Nominal wages are inflexible
  3. Disequilibrium in the labor market exists
  4. All of the above
  5. None of the above
Correct answer: (D)
All of the above

276. The real business cycle theory and the new classical theory agree that

  1. Business cycles are driven by changes in Aggregate demand
  2. Expectations are formed rationally
  3. Imperfect information plays a big role in business cycles
  4. None of the above
Correct answer: (B)
Expectations are formed rationally

277. According to real business cycle theory an increase in taxes

  1. Would significantly reduce labor supply, increase employment, and decrease output
  2. A decline in employment but not in output
  3. Would significantly reduce labor supply, decrease employment, and decrease output
  4. 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

  1. Voluntary unemployment
  2. Real wage rigidity
  3. Changes in unemployment represent changes in the natural rate of unemployment
  4. None of the above
Correct answer: (B)
Real wage rigidity

279. Deductive method

  1. Moves from general to particular
  2. Moves from particular to general
  3. Is based on hypothesis
  4. 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:

  1. Dept trap
  2. Liquidity trap
  3. Poverty trap
  4. Export led growth
Correct answer: (A)
Dept trap
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