Question
Match List - I with List - II. Choose the correct answer from the options given below :List - I List - II A. Q theory I. Unemployment and inflation B. Phillips curve II. Unemployment and output C. Okun's Law III. Investment D. Liquidity trap IV. Demand for money and interest rate
The correct answer is
A-III, B-I, C-II, D-IV
To solve this matching question, we need to correctly associate each item from List - I with the corresponding item in List - II based on economic theories and concepts. Let's analyze each pair:
- Q Theory and Investment: The Q theory of investment, also known as Tobin's Q theory, is an economic theory that explains the relationship between the market value of an asset and its replacement cost. According to this theory, if the market value (Q) is higher than the replacement cost of assets, it motivates firms to invest more. Therefore, Q Theory is related to Investment.
- Phillips Curve and Unemployment and Inflation: The Phillips Curve represents an inverse relationship between the rate of unemployment and the rate of inflation in an economy. It suggests that with economic growth comes inflation, which in turn should lead to lower unemployment. So, Phillips Curve is associated with Unemployment and Inflation.
- Okun's Law and Unemployment and Output: Okun's Law describes the empirically observed relationship between unemployment and output, typically indicating that for every 1% increase in the unemployment rate, a country's GDP will be roughly an additional 2% lower than its potential GDP. Thus, Okun’s Law relates to Unemployment and Output.
- Liquidity Trap and Demand for Money and Interest Rate: A liquidity trap occurs when people hoard cash because they expect an adverse event such as deflation, insufficient aggregate demand, or war. In such a situation, central banks' efforts to stimulate the economy become ineffective, and the demand for money and interest rates are affected. The Liquidity Trap pertains to Demand for Money and Interest Rate.
Based on the above analysis, the correct match for the options given is:
A-III, B-I, C-II, D-IV
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Important Questions from Macroeconomics
- Real-factor demand-pull inflection can be caused by:
A. Increase in investment
B. Decrease in consumer demand
C. Decrease in imports given the exports
D. Decrease in exports given the imports
E. Decrease in government expenditure without change in tax revenue.
Choose the correct answer from the options given below : Match List-I with List-II:
List-I (Concepts) List-II (Given by) A. Paradox of thrift I. K. Boulding B. Water-Diamond paradox II. A.C. Pigou C. Wage employment paradox III. J.M. Keynes D. Macroeconomic paradox IV. Adam Smith
Choose the correct answer from the options given below:- Which of the followings are the effects of increase in government spending in IS-LM framework in a closed economy?
A. Increase in income by multiplier times government expenditure.
B. Shift in IS curve to the right leading to disequilibrium in money market at given level of interest rate.
C. Quantity of money demand will be higher.
D. Interest rate will decrease.
Ε. Private investment will increase leading to increase in aggregate demand.
Choose the correct answer from the options given below : - If the marginal propensity to consume is 0.8 and initial increase in tax revenues by the government is Rs. 100, then the impact on national income would be:
- Which of the followings are true about New Classical approach.
A. The main protagonist was R.E. Lucas Jr.
B. It is based on adaptive expectation.
C. It was developed during 1950s.
D. Complete wage and price flexibility.
Ε. Difference between actual and expected price is a random error.
Choose the most appropriate answer from the options given below :
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