30 Questions
What distinguishes classical economists from their mercantilist predecessors in terms of international trade?
Advocating free trade
Which concept became one of the central ideas in classical economics?
Division of labour
What did Adam Smith's metaphor of the invisible hand illustrate?
Mutual interdependence in a free market economy
According to classical economists, what role does the state have in the market?
Minimal intervention for the common good
What is the main incentive for producers in a self-regulating market economy according to classical economics?
Social necessity
In a free market system, what do signals from free exchanges indicate?
The value of goods and services and their market difficulty
Which factor determines the basic remuneration per time unit or unit of output?
Wage rates
What is the price of one country's currency in relation to another called?
Exchange rates
What term is used for the additional income earned by a person who deposits money to a bank, considering the time value of money?
Interest expense
Which aspect of macroeconomics focuses on the rate of growth of output, inflation rate, changing unemployment, and foreign exchange rates?
Policy oriented macroeconomics
What term describes any activity that tries to influence or manage an economy?
Economic policy
Which of the following is subject to economic policy by governments?
Government budgets and taxation
What is the main reason why macroeconomics is considered 'non-experimental'?
It cannot conduct controlled scientific experiments due to ethical concerns.
How can total output in the economy be measured?
As the sum of the values of final goods and services produced.
What does GNP represent in an economy?
Total output plus net income received from other countries.
How is the average level of prices of goods and services in the economy measured?
With a price index.
What is the main characteristic of employment as highlighted in the text?
Employers must pay employees who provide services.
Why are interest rates considered a key variable in macroeconomics?
Interest rates reflect the cost of borrowing and lending money.
What distinguishes macroeconomics from microeconomics?
Macro focuses on the economy as a whole, while micro focuses on individual economic processes.
Why is it challenging to describe an entire economy using microeconomic models?
It is not feasible to model every firm and individual's cross-effects.
What kind of assumptions are typically imposed in macroeconomic models?
Assumptions that simplify aggregate behavior.
In the context of economics, what does 'aggregate' refer to?
A multitude of economic subjects sharing common features.
Why is it considered a macroeconomic problem when Indian households react to an increased rate of taxation?
It influences the overall behavior of the economy.
What is the purpose of imposing simplifying assumptions in macroeconomic models?
To investigate aggregate behavior while keeping essential features intact.
According to Keynesian economics, what is the role of government in managing the economy?
Ensuring full employment by managing demand
What was one of the main criticisms of the invisible hand concept by critics?
Encouraging negative externalities
What major idea did John Maynard Keynes challenge with his economic theory?
Full employment can be achieved naturally through free markets
What distinguishes the Monetarist School's approach from Keynesian economics?
Focus on controlling money supply primarily
What was a significant contribution of Milton Friedman to economic thought?
Emphasizing controlling money supply for economic stability
In the context of Classical Economics, what situation did economists assume would lead to full employment?
Balancing forces acting to bring output to full-employment level
Explore the fundamental concepts of Macroeconomics, including the study of the economy as a whole and the behavior of aggregate economic activities. Learn about the British economist Alfred Marshall's definition of economics and its connection to individual and social actions.
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