Question : If aggregate supply exceeds aggregate demand, it is likely to result in:
Option 1: Recessionary gap
Option 2: Inflationary gap
Option 3: Equilibrium output
Option 4: Economic growth
Correct Answer: Recessionary gap
Solution : The correct answer is (a) Recessionary gap.
A recessionary gap occurs when the equilibrium level of output in an economy is below the potential level of output. When aggregate supply exceeds aggregate demand, it means that businesses are producing more goods and services than what is being demanded by consumers, investors, and the government.
A recessionary gap is characterized by high unemployment, reduced consumer spending, and sluggish economic growth. It is typically associated with a downward pressure on prices and wages as businesses try to adjust to the lower demand.
To close a recessionary gap and return the economy to its potential level of output, policies such as expansionary fiscal or monetary measures can be implemented to stimulate aggregate demand and encourage increased production and employment.
Question : In case of an underemployment equilibrium, which of the following alternative is not true?
Option 1: Aggregate demand is equal to Aggregate supply
Option 2: There exist excess production capacity in the economy
Option 3: Resources are not fully and efficiently utilized
Option 4: Resources are fully and efficiently utilized
Question : The equilibrium price of a commodity will rise if there is a/an:
Option 1: increase in supply combined with a decrease in demand.
Option 2: increases in both demand and supply.
Option 3: decrease in both demand and supply.
Option 4: increase in demand accompanied by a decrease in supply.
Question : The market equilibrium for a commodity is determined by:
Option 1: the market supply of the commodity.
Option 2: the balancing of the force of demand and supply for the commodity.
Option 3: the intervention of the government.
Option 4: market demand of the commodity.
Question : In an economy, the investment expenditure is Rs.80 crore and consumption function is C= 80+0.75Y. Calculate Equilibrium level of income.
Option 1: 640
Option 2: 700
Option 3: 840
Option 4: 900
Question : "The General Equilibrium Analysis" was developed by:
Option 1: Alfred Marshall
Option 2: David Ricardo
Option 3: Marie-Esprit-Léon Walras
Option 4: Adam Smith
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