Q.1 What does macroeconomics primarily study?
Individual consumer behavior
Price determination of a single product
Economy-wide phenomena like GDP and inflation
Decision-making of a single firm
Explanation - Macroeconomics deals with aggregate economic indicators such as national income, overall price levels, and employment, unlike microeconomics, which focuses on individual markets.
Correct answer is: Economy-wide phenomena like GDP and inflation
Q.2 Which of the following is a macroeconomic variable?
Price of a specific smartphone
Income of an individual
National unemployment rate
Demand for a single brand
Explanation - Macroeconomic variables are aggregate measures affecting the whole economy, such as unemployment rate, inflation, and GDP.
Correct answer is: National unemployment rate
Q.3 Gross Domestic Product (GDP) measures:
Total value of exports only
Total income of a single household
Total market value of all final goods and services produced in a country
Money supply in the economy
Explanation - GDP represents the total market value of all final goods and services produced within a country over a period, reflecting overall economic activity.
Correct answer is: Total market value of all final goods and services produced in a country
Q.4 Inflation refers to:
Increase in unemployment
Decrease in government spending
General rise in price levels of goods and services
Increase in exports
Explanation - Inflation occurs when the general price level of goods and services rises over time, reducing purchasing power.
Correct answer is: General rise in price levels of goods and services
Q.5 Which policy is typically used to control inflation?
Expansionary fiscal policy
Contractionary monetary policy
Increase in government subsidies
Price ceiling on essential goods
Explanation - Contractionary monetary policy, such as increasing interest rates, is used to reduce money supply and control inflation.
Correct answer is: Contractionary monetary policy
Q.6 Unemployment that occurs due to seasonal work patterns is called:
Cyclical unemployment
Structural unemployment
Frictional unemployment
Seasonal unemployment
Explanation - Seasonal unemployment arises when people are unemployed at certain times of the year because their work depends on seasonal demand, like in agriculture or tourism.
Correct answer is: Seasonal unemployment
Q.7 Which of the following is NOT a goal of macroeconomic policy?
Price stability
High unemployment
Economic growth
Full employment
Explanation - Macroeconomic policy aims to reduce unemployment, stabilize prices, and promote economic growth, not increase unemployment.
Correct answer is: High unemployment
Q.8 Aggregate demand consists of:
Consumer spending, investment, government spending, and net exports
Prices of individual products
Firm-level production
Supply of money only
Explanation - Aggregate demand represents the total demand for goods and services in an economy, including consumption, investment, government spending, and net exports.
Correct answer is: Consumer spending, investment, government spending, and net exports
Q.9 Which economic indicator measures the average level of prices in the economy?
GDP
Inflation rate
Unemployment rate
Balance of trade
Explanation - The inflation rate measures the average change in prices of goods and services in an economy over a period.
Correct answer is: Inflation rate
Q.10 Cyclical unemployment occurs due to:
Seasonal changes in employment
Mismatch of skills and jobs
Economic downturns or recessions
Voluntary job changes
Explanation - Cyclical unemployment arises when there is insufficient demand for goods and services, typically during recessions.
Correct answer is: Economic downturns or recessions
Q.11 The main difference between macroeconomics and microeconomics is:
Macroeconomics studies individuals, microeconomics studies firms
Macroeconomics studies aggregate economy, microeconomics studies individual markets
Microeconomics focuses on unemployment
Macroeconomics ignores prices
Explanation - Macroeconomics analyzes the economy as a whole, focusing on aggregate indicators, while microeconomics looks at individual markets and decision-making.
Correct answer is: Macroeconomics studies aggregate economy, microeconomics studies individual markets
Q.12 Which of the following is a limitation of GDP as a measure of economic welfare?
It does not account for income distribution
It includes only government spending
It measures only exports
It accounts for informal economic activities
Explanation - GDP measures total output but ignores how income is distributed among the population and does not include non-market activities.
Correct answer is: It does not account for income distribution
Q.13 Fiscal policy involves changes in:
Money supply
Government spending and taxation
Interest rates
Stock market regulations
Explanation - Fiscal policy is the use of government spending and taxation to influence economic activity, demand, and growth.
Correct answer is: Government spending and taxation
Q.14 Monetary policy is primarily managed by:
Individual businesses
The central bank
The stock exchange
International trade organizations
Explanation - Monetary policy is controlled by a country's central bank, which regulates money supply, interest rates, and credit availability.
Correct answer is: The central bank
Q.15 Which of the following represents structural unemployment?
Workers laid off due to recession
Workers in agriculture during off-season
Workers lacking skills for available jobs
Workers quitting voluntarily
Explanation - Structural unemployment occurs when there is a mismatch between workers’ skills and job requirements.
Correct answer is: Workers lacking skills for available jobs
Q.16 Real GDP differs from nominal GDP because it:
Excludes government spending
Is adjusted for inflation
Includes only exports
Measures only services
Explanation - Real GDP accounts for inflation, showing the true growth in production, whereas nominal GDP measures output at current prices.
Correct answer is: Is adjusted for inflation
Q.17 Which of these is considered an automatic stabilizer in the economy?
Government spending on highways
Progressive income taxes
Central bank reducing interest rates
Export subsidies
Explanation - Automatic stabilizers, like progressive taxes and unemployment benefits, help reduce fluctuations in income and consumption without active intervention.
Correct answer is: Progressive income taxes
Q.18 Balance of payments records:
Income and expenditure of households
Government budget only
All transactions between a country and the rest of the world
Prices of exported goods
Explanation - Balance of payments is a systematic record of all economic transactions between residents of a country and the rest of the world.
Correct answer is: All transactions between a country and the rest of the world
Q.19 Which scenario reflects demand-pull inflation?
Prices rise due to increased consumer spending
Prices rise due to higher production costs
Government imposes a price ceiling
Exports fall due to weaker currency
Explanation - Demand-pull inflation occurs when aggregate demand exceeds aggregate supply, pushing prices upward.
Correct answer is: Prices rise due to increased consumer spending
Q.20 Which of the following can be a cause of cost-push inflation?
Increase in consumer demand
Decrease in government spending
Rising wages and production costs
Lower interest rates
Explanation - Cost-push inflation occurs when higher costs of production, such as wages or raw materials, are passed on to consumers in the form of higher prices.
Correct answer is: Rising wages and production costs
Q.21 Full employment means:
Zero unemployment in the economy
Only cyclical unemployment exists
No one is willing to work
Unemployment is only frictional and structural
Explanation - Full employment does not mean zero unemployment; it indicates that all unemployment is due to normal frictional and structural factors.
Correct answer is: Unemployment is only frictional and structural
Q.22 Which of the following measures the overall economic output per person?
GDP per capita
Nominal GDP
Unemployment rate
Inflation rate
Explanation - GDP per capita divides total GDP by the population, giving an average output or income per person, used as an indicator of living standards.
Correct answer is: GDP per capita
Q.23 Which of these is a limitation of using GDP as a welfare indicator?
It does not include environmental degradation
It measures total exports
It accounts for technological growth
It measures government spending
Explanation - GDP ignores negative externalities such as environmental degradation, which can affect true economic welfare.
Correct answer is: It does not include environmental degradation
Q.24 Which of the following would increase aggregate supply?
Increase in wages
Technological advancement
Higher taxes on firms
Increase in import tariffs
Explanation - Technological improvements enhance productivity and efficiency, shifting the aggregate supply curve to the right.
Correct answer is: Technological advancement
Q.25 Which of these is a macroeconomic goal of government?
Maximizing profits for individual firms
Ensuring economic growth, price stability, and employment
Setting prices of individual products
Regulating internal firm decisions
Explanation - Governments aim to maintain sustainable growth, control inflation, and reduce unemployment at the macro level.
Correct answer is: Ensuring economic growth, price stability, and employment