Economics Topics
Undergraduate level — Economics
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Microeconomics
Macroeconomics
Indian Economy
Bihar Economy
Budget & Fiscal Policy
quiz Questions
Q71
Which standard monetary aggregate is classified as 'Reserve Money' or 'High-Powered Money' ($M0$) by the Reserve Bank of India?
Currency with the public + Demand deposits ($M1$)
Currency in circulation + Bankers' deposits with RBI + Other deposits with RBI ($M0$)
$M1$ + Time deposits with the banking system ($M3$)
Post office savings bank deposits
Explanation
High-powered money ($M0$) consists of currency in circulation, bankers' deposits with the RBI, and 'other' deposits with the RBI, acting as the baseline monetary base.
Q72
What graphical line tracks the combinations of interest rates and real national output where the money market clears, balancing money supply with money demand?
IS Curve
LM Curve
Phillips Curve
Lorenz Curve
Explanation
The LM (Liquidity Preference-Money Supply) curve slopes upward and maps out the locus of equilibria in the money market under the Hicks-Hansen IS-LM model.
Q73
The short-run Phillips Curve posits a negative, trade-off relationship between which two macroeconomic indicators?
Economic growth and income distribution
The rate of inflation and the rate of unemployment
Fiscal deficit and current account deficit
Money supply expansion and real interest rates
Explanation
The original short-run Phillips curve shows an empirical inverse relationship between the rate of inflation (or wage inflation) and the rate of unemployment.
Q74
According to Milton Friedman and the Monetarist school, what is the shape of the long-run Phillips Curve at the Natural Rate of Unemployment (NAIRU)?
Perfectly horizontal
Perfectly vertical
Downward sloping from left to right
Bowed outward toward the origin
Explanation
Monetarists and Classical economists argue that there is no long-run trade-off between inflation and unemployment. The long-run Phillips curve is a vertical line at the natural rate of unemployment.
Q75
Which type of inflation is triggered by a continuous outward shift in aggregate demand that outpaces the expansion of the economy's productive capacity?
Cost-push inflation
Demand-pull inflation
Structural inflation
Stagflationary drag
Explanation
Demand-pull inflation occurs when aggregate demand for goods and services outstrips aggregate supply ('too much money chasing too few goods'), pulling prices upward.
Q76
What paradoxical phenomenon describes an economy simultaneously experiencing sluggish output growth, high systemic unemployment, and persistent price inflation?
Hyperinflation
Stagflation
Reflationary loop
Core deflation
Explanation
Stagflation combines the terms 'stagnation' and 'inflation,' detailing a challenging economic state typically caused by severe adverse supply shocks.
Q77
In the context of the business cycle, what specific term defines the inflection point where an economic contraction ends and a recovery phase begins?
Peak
Trough
Recession baseline
Boom threshold
Explanation
The trough is the lowest point of a business cycle, marking the transition from the recessionary or contractionary phase to the expansionary or recovery phase.
Q78
According to the Rational Expectations Hypothesis (REH) associated with New Classical macroeconomics, anticipated monetary policy adjustments will have what impact on real output?
A massive, long-term expansion in real output
Zero effect on real output, causing changes only in nominal price variables
A temporary short-run reduction in structural unemployment
A multi-period distortion in the velocity of money
Explanation
The Policy Ineffectiveness Proposition states that if a policy change is anticipated, economic agents instantly adapt their price and wage expectations, neutralizing any effect on real variables like output or employment.
Q79
Which type of unemployment captures individuals who are temporarily out of work because they are in the process of relocating, changing careers, or searching for a better job match?
Structural unemployment
Frictional unemployment
Cyclical unemployment
Disguised unemployment
Explanation
Frictional unemployment is voluntary and short-term, representing the natural transactional search friction involved in matching workers with optimal job openings.
Q80
In macroeconomics, the 'Paradox of Thrift' demonstrates that if all individuals within an economy simultaneously attempt to increase their savings rate during a deep recession, what will be the collective structural outcome?
Capital accumulation deepens rapidly, lifting long-run output
Aggregate demand and national income contract, leaving total actual savings stagnant or lower
The real interest rate falls to zero, expanding corporate investment instantly
The velocity of currency transactions spikes to positive infinity
Explanation
The paradox of thrift shows that higher intended savings leak demand from the circular flow of income. This cuts aggregate demand and income, leaving total community savings lower or unchanged.