Introduction to Macroeconomics
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Questions and Answers

In the circular flow of income model, what is the main difference between flows and stocks?

  • Stocks include imports and exports, while flows consist of changes in money supply.
  • Flows represent a change in stock variables, while stocks have no flow counterpart. (correct)
  • Flows have a definite beginning and ending point, while stocks do not.
  • Stocks involve changes in inventories, while flows involve savings and investments.

    • Which of the following is NOT a real flow in an economy as explained by the circular flow of income model?

  • Flows of factors of production
  • Flows of taxes and wages (correct)
  • Flows of goods and services
  • Flows of money between different sectors

    • What is the purpose of the circular flow of income model in macroeconomics?

  • To study short-term fluctuations in unemployment rates
  • To analyze long-run growth in the financial market
  • To determine the overall level of income and output in a nation (correct)
  • To regulate the interest rates in the country

    • Which market consists of financial institutions that engage in borrowing and lending money?

    <p>Financial market</p> Signup and view all the answers

    According to the circular flow of income model, what is the main assumption about households' spending behavior?

    <p>Households spend all their income on goods and services produced.</p> Signup and view all the answers

    What is the significance of the 'real flows' concept in the circular flow of income model?

    <p>'Real flows' encompass exchanges of factors of production and goods/services.</p> Signup and view all the answers

    What is the main focus of Macroeconomics?

    <p>Examining the entire economy as a whole</p> Signup and view all the answers

    Which of the following is a static concept according to the text?

    <p>Money supply</p> Signup and view all the answers

    Who introduced the alternative theory to explain the determination of employment and output?

    <p>Keynes</p> Signup and view all the answers

    Which school of thought includes the theories of David Ricardo and J.S. Mill?

    <p>Classical School of thoughts</p> Signup and view all the answers

    Which concept has a time dimension and is measured over a period of time?

    <p>Flow</p> Signup and view all the answers

    Which theory assigns a critical role to money in the economy?

    <p>Monetarism</p> Signup and view all the answers

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