Unit 1- MACRO ECONOMICS -100 MCQ WITH ANSWERS

Macro-Economics: Concept and Scope

1. What does macroeconomics primarily study?

A) Individual consumer behavior
B) Production in a single firm
C) Economy-wide phenomena
D) Pricing of a product
Answer: C
2. Which of the following is not a macroeconomic concept?
A) National income
B) Aggregate demand
C) Consumer equilibrium
D) Inflation
Answer: C
3. Macroeconomics deals with:
A) Study of one industry
B) Study of national economy
C) Individual markets
D) Managerial decisions
Answer: B
4. The study of aggregate employment and income is part of:
A) Microeconomics
B) Macroeconomics
C) Financial accounting
D) Business statistics
Answer: B
5. Which of the following is a macroeconomic goal?
A) Profit maximization
B) Product pricing
C) Full employment
D) Cost reduction
Answer: C

Macroeconomic Paradoxes

6. The paradox of thrift suggests that if everyone saves more during a recession:
A) Aggregate demand increases
B) The economy grows faster
C) Overall savings may fall
D) Interest rates rise
Answer: C
7. Who proposed the paradox of thrift?
A) Adam Smith
B) David Ricardo
C) J.M. Keynes
 D) Milton Friedman
Answer: C
8. The paradox of thrift is related to:
A) Increase in government spending
B) Decrease in interest rate
C) Decrease in aggregate demand
D) Increase in taxes
Answer: C
9. Which paradox relates employment to wage rates?
A) Paradox of thrift
B) Wage-employment paradox
C) Money illusion
D) Liquidity trap
Answer: B
10. In the wage-employment paradox, a rise in wages may lead to:
A) More employment
B) Constant employment
C) Less employment
D) Higher savings
Answer: C

Circular Flow of Income and Expenditure

11. The circular flow model shows the interaction between:

A) Government and rest of the world
B) Households and firms
C) Banks and stock markets
D) Schools and firms
Answer: B
12. In the two-sector model, the two sectors are:
A) Firms and banks
B) Households and firms
C) Government and firms
D) Rest of the world and firms
Answer: B
13. Which of the following flows from firms to households?
A) Factors of production
B) Goods and services
C) Taxes
D) Savings
Answer: B
14. Which of the following is an injection in the circular flow of income?
A) Savings
B) Taxes
C) Investments
D) Imports
Answer: C
 15. Which is a leakage from the circular flow of income?
A) Consumption
B) Government expenditure
C) Investment
D) Savings
Answer: D
16. In the three-sector model, the additional sector is:
A) Banks
B) Government
C) Households
D) Foreign sector
Answer: B
17. Taxes are a form of:
A) Injection
B) Leakage
C) Transfer payment
D) Credit
Answer: B
18. Which of the following is a factor income paid to households?
A) Rent
B) Interest
C) Wages
D) All of the above
Answer: D
19. Which of the following is true in equilibrium in circular flow?
A) Injections > Leakages
B) Injections = Leakages
C) Injections < Leakages
D) Injections and leakages irrelevant
Answer: B
20. Transfer payments from government to households are considered:
A) Production
B) Factor income
C) Non-factor income
D) Imports
Answer: C

National Income: Concepts and Definitions

21. National Income refers to the:

A) Income of government
B) Total value of goods produced
C) Total income earned by the nation
D) Profits of firms
Answer: C
22. Which of the following is included in national income?
A) Black money
B) Transfer payments
 C) Illegal income
D) Wages and salaries
Answer: D
23. Which concept measures national income at factor cost?
A) GDP
B) NNP
C) NNP at factor cost
D) GNP at market price
Answer: C
24. Which is not included in the calculation of national income?
A) Salaries
B) Rent
C) Old age pension
D) Profit
Answer: C
25. The income earned by factors of production within a country is called:
A) National income
B) Domestic income
C) Gross income
D) Personal income
Answer: B
26. Personal income is:
A) Income received by households
B) Income earned by firms
C) Disposable income
D) National income minus taxes
Answer: A
27. Disposable income is:
A) PI – Personal taxes
B) NI + Transfer payments
C) GDP – Depreciation
D) GNP + Net factor income
Answer: A
28. Which of the following is not a component of national income?
A) Compensation of employees
B) Rent
C) Subsidies
D) Profits
Answer: C
29. GDP at market price includes:
A) Indirect taxes
B) Subsidies
C) Net exports
D) All of the above
Answer: D
30. Net National Product is derived by:
A) GDP – Depreciation
B) GNP – Depreciation
C) NDP + Net foreign income
 D) NNP + Subsidies
Answer: B

Components of National Income

31. Which of the following is a component of compensation of employees?

A) Wages and salaries
B) Employer’s contribution to social security
C) Perquisites
D) All of the above
Answer: D
32. Mixed income is income of:
A) Wage earners
B) Capitalists
C) Self-employed persons
D) Government
Answer: C
33. Operating surplus includes:
A) Rent and interest
B) Profits
C) Mixed income
D) Both A and B
Answer: D
34. Which is not a part of operating surplus?
A) Rent
B) Interest
C) Wages
D) Profit
Answer: C
35. National income includes income from:
A) Illegal activities
B) Transfer payments
C) Factor payments
D) Sale of land
Answer: C

[Due to space, continue to next message for Questions 36–100]

Continuing from the previous list, here are Questions 36 to 100 for Unit I: Macro-
Economics:

Components of National Income (cont.)

 36. Which of these is not considered a factor income?
A) Wages
B) Rent
C) Pension
D) Interest
Answer: C
37. Net Indirect Taxes =
A) Indirect Taxes – Subsidies
B) Direct Taxes – Subsidies
C) Indirect Taxes + Direct Taxes
D) Subsidies – Indirect Taxes
Answer: A
38. Subsidies are:
A) Added to GDP
B) Subtracted from GDP at market prices
C) Ignored in national income
D) Added to GDP at factor cost
Answer: D
39. GDP at factor cost is calculated by:
A) GDP – NIT
B) GDP + Depreciation
C) NDP – Subsidies
D) GNP – Net exports
Answer: A
40. Which of the following is not a measure of national income?
A) GDP
B) NNP
C) CPI
D) GNP
Answer: C

Methods of Measuring National Income

41. Which of the following is a method of measuring national income?

A) Production method
B) Income method
C) Expenditure method
D) All of the above
Answer: D
42. In income method, which of the following is included?
A) Factor incomes
B) Intermediate goods
C) Transfer payments
D) Capital gains
Answer: A
43. Value added method avoids:
A) Double counting
B) Factor payments
 C) Net income
D) Capital expenditure
Answer: A
44. In expenditure method, which of the following is considered?
A) Government expenditure
B) Consumption expenditure
C) Investment expenditure
D) All of the above
Answer: D
45. Which method calculates value added at each stage of production?
A) Income method
B) Expenditure method
C) Value added method
D) Output method
Answer: C
46. Depreciation is:
A) Net indirect tax
B) Loss of capital value
C) Capital gain
D) Transfer income
Answer: B
47. GNP includes:
A) Income earned domestically
B) Income earned by citizens abroad
C) Foreign aid
D) Capital gains
Answer: B
48. Net Factor Income from Abroad is added to GDP to get:
A) NDP
B) GNP
C) NNP
D) NDP at factor cost
Answer: B
49. In income method, national income =
A) COE + OS + MI
B) Wages + Profits + Taxes
C) Output – Input
D) Income – Depreciation
Answer: A
50. Expenditure on second-hand goods is:
A) Included
B) Excluded
C) Counted twice
D) Added in operating surplus
Answer: B

National Income and Welfare

 51. National income does not reflect welfare accurately because it ignores:
A) Environmental costs
B) Leisure time
C) Distribution of income
D) All of the above
Answer: D
52. Which measure is considered a better indicator of welfare?
A) GNP
B) NNP
C) Per capita income
D) Total income
Answer: C
53. Higher national income always means higher welfare. True or False?
A) True
B) False
Answer: B
54. Real national income considers:
A) Nominal prices
B) Inflation
C) Transfer payments
D) Black money
Answer: B
55. If national income increases but inequality rises, welfare:
A) Increases
B) Decreases
C) Remains unchanged
D) Cannot be said
Answer: B

GDP, GNP, NNP, and Related Concepts

56. Gross Domestic Product (GDP) is calculated at:

A) Factor cost
B) Market price
C) Constant price
D) Current price only
Answer: B
57. Net Domestic Product (NDP) =
A) GDP – Depreciation
B) GNP – Taxes
C) GDP – Subsidies
D) GNP + Depreciation
Answer: A
58. NNP at Factor Cost is also known as:
A) National Income
B) Disposable Income
C) Domestic Income
 D) Per Capita Income
Answer: A
59. GDP Deflator is a measure of:
A) Employment
B) Money supply
C) Price level
D) Savings
Answer: C
60. Which is considered the broadest measure of national income?
A) GDP
B) GNP
C) NNP
D) NNP at factor cost
Answer: D

Per Capita Income and Limitations

61. Per capita income =

A) GDP / Working population
B) GDP / Total population
C) GNP / Employed population
D) NDP / Tax payers
Answer: B
62. High per capita income may not reflect:
A) Inflation
B) Social inequality
C) Imports
D) Employment
Answer: B
63. Which of these is a limitation of national income as a measure of welfare?
A) Black economy
B) Unpaid work
C) Externalities
D) All of the above
Answer: D
64. Underground economy affects:
A) Inflation
B) Tax revenue
C) National income accuracy
D) Imports
Answer: C

Conceptual and Miscellaneous

65. Which of the following is a macroeconomic issue?

A) Consumer behavior
 B) Demand for a commodity
C) Aggregate investment
D) Cost of a product
Answer: C
66. Investment in inventories is included in:
A) Consumption
B) Government spending
C) Investment
D) Imports
Answer: C
67. Consumption function shows relation between:
A) Income and savings
B) Consumption and savings
C) Income and consumption
D) Investment and income
Answer: C
68. Saving function is derived from:
A) Consumption function
B) Production function
C) Demand function
D) Investment function
Answer: A
69. Multiplier relates to:
A) Consumption
B) Investment
C) Government policy
D) Change in income due to investment
Answer: D
70. Inflation leads to an increase in:
A) Real income
B) Nominal income
C) Disposable income
D) National income
Answer: B

71. Which of the following is not included in GDP?

A) Final goods
B) Intermediate goods
C) Capital goods
D) Government expenditure
Answer: B
72. Which one of the following is a stock concept?
A) Income
B) Investment
C) Wealth
D) Wages
Answer: C
73. Which one of the following is a flow concept?
A) Capital
B) National income
 C) Land
D) Wealth
Answer: B
74. Which is a measure of economic growth?
A) CPI
B) National income
C) GDP
D) Wholesale Price Index
Answer: C
75. Which of these contributes to national income?
A) Sale of used car
B) Lottery winnings
C) House rent
D) Old age pension
Answer: C
76. The income method excludes:
A) Wages
B) Rent
C) Subsidies
D) Profits
Answer: C
77. The largest component of GDP using expenditure method is generally:
A) Investment
B) Net exports
C) Government spending
D) Consumption expenditure
Answer: D
78. Which is not a part of gross capital formation?
A) Inventory investment
B) Depreciation
C) Residential construction
D) Business investment
Answer: B
79. In national income accounting, the imputed rent of owner-occupied houses is:
A) Ignored
B) Subtracted
C) Included
D) Treated as depreciation
Answer: C
80. To avoid double counting, national income includes:
A) Final goods
B) Intermediate goods
C) Both A and B
D) None
Answer: A
81. Who prepares the National Income estimates in India?
A) RBI
B) NITI Aayog
C) CSO/NSO
 D) Planning Commission
Answer: C
82. Nominal GDP is measured at:
A) Constant prices
B) Base year prices
C) Current prices
D) Market cost
Answer: C
83. Real GDP is measured at:
A) Market prices
B) Current prices
C) Constant prices
D) Future prices
Answer: C
84. Rise in GDP with rise in inflation refers to:
A) Real growth
B) Nominal growth
C) Per capita growth
D) True growth
Answer: B
85. National income statistics help in:
A) Planning
B) Comparison
C) Policy-making
D) All of the above
Answer: D
86. Value Added =
A) Output – Intermediate consumption
B) Output + Consumption
C) Sales + Subsidies
D) Cost – Sales
Answer: A
87. Economic welfare depends on:
A) National income
B) Price level
C) Distribution of income
D) All of the above
Answer: D
88. GDP does not include:
A) Illegal activities
B) Export earnings
C) Government spending
D) Net indirect taxes
Answer: A
89. What is added to NDP at market price to get NNP at market price?
A) Subsidies
B) Net Factor Income from Abroad
C) Depreciation
D) Capital gains
Answer: B
90. When gross investment equals depreciation, net investment is:
A) Zero
B) Negative
C) Positive
D) Equal to depreciation
Answer: A
91. Which is not a limitation of GDP as an index of welfare?
A) Ignores leisure
B) Does not reflect distribution
C) Reflects environmental impact
D) Includes only market activities
Answer: C
92. Transfer payments are included in:
A) GDP
B) NNP
C) None of the above
D) GNP
Answer: C
93. The formula to calculate national income using expenditure method is:
A) C + I + G + (X – M)
B) C + I + G
C) C + S + T
D) C + G – S
Answer: A
94. Which of the following does not affect national income?
A) Increase in exports
B) Public investment
C) Black money
D) Personal consumption
Answer: C
95. Which of the following statements is true?
A) GNP = GDP – NFIA
B) NNP = GNP + Depreciation
C) NDP = GDP – Depreciation
D) GDP = GNP + NFIA
Answer: C
96. Which method is most suitable for underdeveloped economies to estimate
national income?
A) Income method
B) Expenditure method
C) Output method
D) None
Answer: C
97. Which of these is not a leakage in circular flow?
A) Saving
B) Investment
C) Taxation
D) Imports
Answer: B
98. Circular flow in a four-sector model includes:
A) Households, Firms, Government, Foreign sector
B) Firms, Households, Government, NGOs
C) Households, Firms, Stock market, Banks
D) None of these
Answer: A
99. Black market activities are excluded from:
A) Nominal GDP
B) Real GDP
C) National income
D) GNP
Answer: C
100. A rise in per capita income means:
A) Increase in GDP
B) Increase in income per person
C) Increase in exports
D) Increase in profit
Answer: B