Introduction To Economics Quiz

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How does an increase in economic activity impact the price level?

It may drive the price level down
It stabilizes the price level
It may drive the price level up (correct)
It has no impact on the price level

What is the relationship between the level of economic activity and output?

They are directly proportional (correct)
There is no relationship
The relationship depends on resource availability
They are inversely proportional

How does resource mobilization impact national income at current prices?

It only impacts national income at constant prices
It reduces the national income through excessive spending
It has no impact on national income
It influences the national income by affecting output levels (correct)

What does the nominal value of national income represent?

Value of national output at current prices (D) Signup and view all the answers

What is the significance of measuring national income at constant prices?

To account for inflation and show real growth (C) Signup and view all the answers

What is one of the challenges mentioned in estimating the national income correctly?

Difficulty in estimating the varied and numerous goods and services produced (C) Signup and view all the answers

Why is it important to consider resource availability in determining national income?

Resource availability directly impacts output levels (A) Signup and view all the answers

What does 'double counting' refer to in the context of estimating national income?

Including a commodity or service more than once in the national income calculation (B) Signup and view all the answers

Which sector faces challenges due to the fear of double counting in estimating national income?

Financial sector (C) Signup and view all the answers

What is the consequence of incorrectly estimating national income?

Inaccurate financial projections (A) Signup and view all the answers

Why is it challenging to estimate national income accurately in the present day world?

Due to the difficulty in assessing the vast array of goods and services produced (A) Signup and view all the answers

Which factor contributes to the possibility of double counting in the estimation of national income?

Including a particular commodity or service more than once (B) Signup and view all the answers

What is the method to find the nominal value of national income?

Multiplying the quantity of output by the retail price of output (B) Signup and view all the answers

How do firms typically react to an unsustainable increase in demand?

By raising prices (C) Signup and view all the answers

What is likely to happen to wages when the labor market clears and unemployment falls?

They are likely to rise (A) Signup and view all the answers

How is the real value of changes in output affected under inflationary conditions?

Driven up by higher wages and prices (C) Signup and view all the answers

What does holding prices constant from a base year help determine?

The effects of general price increases on real value (C) Signup and view all the answers

'Indian Financial System: Commercial Banking' mentions that despite being simple and comprehensive, Marshall's definition suffers from what?

'A number of limitations' (B) Signup and view all the answers