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GK
GK Set-1
Economics
Macro Economics
45

Macro Economics MCQ (GK Set-1) with Answers

45) The reason that it does not matter whether a firm uses debt (borrowing) or equity (own saved funds) to finance its investment plans is

that Ricardian equivalence fails.

that in a global world it is always possible for a nation to borrow abroad.

that a Ponzi-scheme is necessary so the firm is indifferent

that firms belong to their shareholders and the net return from investment raises their wealth

Answer is:

that firms belong to their shareholders and the net return from investment raises their wealth

Macro Economics MCQ (GK Set-1) with Answers

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Related Macro Economics MCQ (GK Set-1) with Answers

46) Consider the current government budget, where: T1 is today’s net taxes. D1 is government debt at the start of today. G1 is today’s government spending. rG is the real interest rate paid on government debt. All variables are positive.

T1 - G1 - rGD1 > 0

D1 (1+ rG) > T1 - G1

rGD1 > T1 - G1

(G1+ D1) rG - T1 > 0

Answer is:

rGD1 > T1 - G1

47) Suppose the market interest rate is equal to 5%. The price of a bond that promises one payment of Rs.100 in one year would be equal to:

Rs.100.00 - Rs.5.00

Rs. 100.00

Rs.100.00 + Rs.5.00

Rs.100 Rs. 1.05

Answer is:

Rs.100 Rs. 1.05

48) The difference between a nation’s current account surplus and its primary account surplus is its

net asset position with respect to the rest of the world

net investment income from abroad

balance of payments

net sovereign borrowing

Answer is:

net investment income from abroad

49) If, for Crusoe’s current intertemporal consumption pattern (satisfying his intertemporal budget constraint), his marginal rate of intertemporal substitution is 1 and the real rate of interest is positive, then

the interest rate will fall to zero.

Crusoe could increase his lifetime utility by consuming more today.

Crusoe could increase his lifetime utility by consuming less today

Crusoe is necessarily a borrower

Answer is:

Crusoe could increase his lifetime utility by consuming less today

Macro Economics MCQ (GK Set-1) with Answers

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