Macroeconomics: Functions and Scope of Government in Economic Affairs - MCQs with answers

Macroeconomics: Functions and Scope of Government in Economic Affairs - MCQs with answers


1) Which among the following is NOT an example of 'public goods'?

a) National defense
b) Roads
c) Cars
d) National Forests


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ANSWER: c) Cars

Public goods are those goods that cannot be provided by market mechanisms.



2) Which among the following is NOT an example of 'private goods'?

a) Clothes
b) Cars
c) Military
d) Food items

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ANSWER: c) Military



3) The function of a government to provide goods that cannot normally be provided by market mechanisms between individual customers and producers, is known as:

a) Distribution function
b) Allocation function
c) Stabilization
d) Protection

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ANSWER: b) Allocation function



4) The function of a government to fairly share the public's resources is known as

a) Distribution function
b) Allocation function
c) Stabilization
d) Protection

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ANSWER: a) Distribution function



5) The function of a government by which it seeks to seek a balance of employment, demand-supply, and inflation, is known as:

a) Distribution function
b) Allocation function
c) Stabilization
d) Protection

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ANSWER: c) Stabilization



6) The Government Budget consists of which main component/s?

a) Revenue Budget and Capital Budget
b) Capital Budget only
c) Revenue Budget only
d) None of the above

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ANSWER: a) Revenue Budget and Capital Budget



7) Loans raised by the government from the public are known as:

a) Corporate borrowings
b) Common borrowings
c) Market borrowings
d) Private borrowings

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ANSWER: c) Market borrowings



8) Whenever the government spends more than it collects through revenue, the resulting imbalance is known as :

a) Public deficit
b) Market deficit
c) Government deficit
d) Budget deficit

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ANSWER: d) Budget deficit



9) The idea that government's fiscal policy can be used to stabilize the level of output and employment can be attributed to which of the following economists:

a) Frederich Hayek
b) Ludwig von Mises
c) Frederic Bastiat
d) John Maynard Keynes

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ANSWER: d) John Maynard Keynes

John Maynard Keynes's 1936 book, 'The General Theory of Employment, Interest, and Money' laid the foundations for Macroeconomics



10) The deliberate action of the government to stabilize the economy, as opposed to the inherent automatic stabilizing properties of the fiscal system, is known as

a) Forced fiscal policy
b) Manual fiscal policy
c) Discretionary fiscal policy
d) Automatic fiscal policy

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ANSWER: c) Discretionary fiscal policy



11) The idea that irrespective of how a government chooses to increase spending, either by debt financing or tax financing, the outcome will be the same and demand will remain unchanged, is popularly known as:

a) Ricardian theory of equivalence
b) Ricardian theory of competitive advantage
c) Ricardian theory of stability
d) None of the above

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ANSWER: a) Ricardian theory of equivalence

David Ricardo was a British political economist and his most famous theory was that of comparative advantage (along with above theory of Ricardian equivalence) . Comparative advantage refers to the doctrine that any nation should use its resources solely in industries where it has the most international competitiveness

The theory of Ricardian equivalence, as stated above in the question, was also further developed by Harvard professor Robert Barro who took it much further



12) When was the Fiscal Responsibility and Budget Management Act implemented?

a) 1950
b) 1970
c) 1993
d) 2003

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ANSWER: d) 2003

It was enacted in August 2003 that made it obligatory for the government to pursue a prudent fiscal policy through the institutional framework. The rules under FRBMA, 2003 were notified with effect from July, 2004

The Act includes several provisions such as ensuring greater transparency in fiscal operations


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