Micro Economics MCQ (GK Set-1) with Answers

It has no effect

It affects variables expressed in nominal terms, notably prices, but not variables expressed in real terms, notably output and unemployment

It affects variables expressed in real terms, notably output and unemployment, but not variables expressed in nominal terms, notably prices.

It affects variables expressed in nominal terms and variables expressed in real terms, notably prices, output and unemployment

No effect

The price level will rise, but by less than 10%

The price level will rise by 10%

The price level will rise by more than 10%

Workers would resist cuts in nominal wages which reduced their wages relative to those paid in other occupations

Trade unions would resist cuts in nominal wages

Even if nominal wages fell, there might then be falls in prices, and this could lead to a further fall in demand in the economy if people deferred some purchases until they felt prices would fall no further

Any efforts by the government to increase demand in the economy would lead to higher real wages and so increase unemployment

Fiscal expansion was highly effective because of the balanced budget multiplier.

Monetary expansion might have little effect because the demand for money is interest elastic.

If interest rates fell, consumer spending might not rise much, because it depends chiefly on incomes, not on interest rates

If interest rates fell, investment spending might not rise much, because it depends substantially on firms’ ’animal spirits

A tax cut which consumers thought would be only temporary might have very little effect on their spending

Monetary expansion might have considerable effect because the demand for money is interest elastic

If interest rates fell, consumer spending might rise greatly

If interest rates fell, investment spending might rise greatly