ECO401 Mega File

Mega Quiz File · (ECO401) · by · Shahzad Sadiq · Special Thanks · to · Attock VU Group · VU Study Masti

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A study of how increases in the minimum wage rate will affect the national unemployment rate is an example of

descriptive economics. normative economics. macroeconomics. microeconomics.

The total demand for goods and services in an economy is known as

aggregate demand. national demand. gross national product. economy-wide demand.

Deflation is

an increase in the overall level of economic activity. an increase in the overall price level. a decrease in the overall level of economic activity. a decrease in the overall price level.

A recession is

a period of declining prices. a period during which aggregate output declines. a period of declining unemployment. a period of falling trade volumes.

Involuntary unemployment means that people are not willing to work at the going wage rate. at the going wage rate, there are people who want to work but cannot find work. there are some people who will not work at the going wage rate. there is excess demand in the labour market.

A cut in the income tax rate designed to encourage household consumption is an example of

expansionary demand-side policy. contractionary demand-side policy. expansionary supply-side policy. contractionary supply-side policy.

A cut in the tax rate designed to reduce the cost of capital and hence encourage business investment is an example of

expansionary demand-side policy. contractionary demand-side policy. expansionary supply-side policy. contractionary supply-side policy.

Macroeconomics is the branch of economics that deals with

the economy as a whole. imperfectly competitive markets. only the long run adjustments to equilibrium in the economy. the functioning of individual industries and the behaviour of individual decision-making units - business firms and households.

A group of modern economists who believe that price and wage rigidities do not provide the only rationale for macroeconomic policy activism are called:

Macroeconomic theory that emphasised the theories of Keynes and de-emphasised the Classical theory developed as the result of the failure of

economic theory to explain the simultaneous increases in inflation and unemployment during the 1970s. fine tuning during the 1960s. the economy to grow at a rapid rate during the 1950s. the Classical model to explain the prolonged existence of high unemployment during the Great Depression.

Keynes believed falling wages were not a solution to persistent unemployment because

falling wages demoralised workers. this would reduce the purchasing power of labourers as consumers. This in turn would bleaken firms’ prospects of selling more goods, hence inducing them to cut their investment (and hence labour) demand. the unemployment was caused by frictional and structural factors. wages would fall more than required to clear the labour market.