Economics Test

Directions For Questions

Direction: Read the below case and answer the questions that follow:

Circular Income Flow in a Two Sector Economy: In the figure given we can see that upper loop shows the resources such as land, capital and entrepreneurial ability flow from households to firms in the direction shown by the arrow direction.

The money flows from firms to the households as factor payments in the form of wages, rent, interest and profits, shown by the arrow direction.

The lower part of the figure shows the flow of money from households to firms in the form of consumption expenditure done by the households to purchase the goods and services produced by the firms, making the flow of goods and services from firms to households.

Thus, we see that money flows from business firms to households as factor payments and then it flows from households to firms. Thus, there is, in fact, a circular flow of money or income. This is how the economy functions.

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Economics Test ...

Question 1

(A) - (II), (B) - (III), (C) - (I), (D) - (IV)

(A) - (III), (B) - (II), (C) - (I), (D) - (IV)

(A) - (IV), (B) - (II), (C) - (III), (D) - (I)

(A) - (I), (B) - (IV), (C) - (II), (D) - (III)

Question 2

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)

(A) - (III), (B) - (I), (C) - (IV), (D) - (II)

(A) - (IV), (B) - (III), (C) - (I), (D) - (II)

(A) - (II), (B) - (IV), (C) - (I), (D) - (III)

Question 3

(A) and (C) only

(B) and (C) only

(A), (B), and (C) only

(B), (C), and (D) only

Question 4

By determining the production levels of firms.

By participating as workers, earning wages, and consuming goods.

By influencing interest rates and government policies.

By focusing solely on individual profit maximization.

Question 5

Which are for resale

Which are for long term use

Which capital can buy

Which are for final consumption

Question 6

It is the process of total withdrawal creation

It is the process of loan creation

It is the process of total deposit creation

It is the process of creation of foreign exchange

Question 7

K

1-MPS

MPS

MPC

Question 8

Ensures supply of the fixed exchange rate

Ensures demand for the fixed exchange rate

Ensures stability of the fixed exchange rate

None

Question 9

Ignoring all market activities.

Focusing on a single imaginary commodity to represent the economy.

Studying each individual market separately.

Only considering the behavior of private companies.

Question 10

Domestic economy comprises only 2 sectors, the producers and the households.

The households spend their entire income, so that there is no saving.

Both A and B

None of these

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