Indian Economy & Macroeconomics (Class-XII)

  Determination of Income and Employment Class- 12 MCQs  Question 1. What is the shape of the Keynesian Aggregate Supply before the level of full employment is attained? (A) Perfectly inelastic (B) Perfectly elastic (C) Unitary elastic (D) More elastic Answer: (B) Perfectly elastic Question 2. According to classical economists, real wage rate is ______ to the Marginal Productivity of Labour. (A) Equal (B) More (C) Less (D) None of these Answer: (A) Equal Question 3. What is the cause of Keynesian perfectly elastic Aggregate Supply curve? (A) Wage price rigidity (B) Constant Marginal Product of Labour (C) Both of these (D) None of these Answer: (C) Both of these Question 4. According to classical economists, there always exists ______ equilibrium in the economy. (A) Full employment (B) Underemployment (C) Over full employment (D) None of these Answer: (A) Full employment Question 5. What will be APC when APS = 0? (A) One (B) Z

Central Bank as a Controller of Money Supply or Credit: Principal instruments of Monetary Policy or credit control of the Central Bank of a country are broadly classified as: (a) Quantitative Instruments or General Tools; and (b) Qualitative Instruments or Selective Tools. (a) Quantitative Instruments or General Tools of Monetary Policy: These are the instruments of monetary policy that affect overall supply of money/credit in the economy. These instruments do not direct or restrict the flow of credit to some specific sectors of the economy. They are as under: (i) Bank Rate (Discount Rate) • Bank rate is the rate of interest at which central bank lends to commercial banks without any collateral (security for purpose of loan) for long term. • In a situation of excess demand leading to inflation ,   Central bank raises bank rate that discourages commercial banks in borrowing from central bank as it will increase th