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Test: Fiscal Policy- 4 - B Com MCQ


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10 Questions MCQ Test - Test: Fiscal Policy- 4

Test: Fiscal Policy- 4 for B Com 2024 is part of B Com preparation. The Test: Fiscal Policy- 4 questions and answers have been prepared according to the B Com exam syllabus.The Test: Fiscal Policy- 4 MCQs are made for B Com 2024 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests for Test: Fiscal Policy- 4 below.
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Test: Fiscal Policy- 4 - Question 1
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According to the provided text, what is the primary reason for people accepting job opportunities during a period of inflation?

Detailed Solution for Test: Fiscal Policy- 4 - Question 1
During a period of inflation, even though money wage rates rise, real wage rates do not actually increase. However, workers perceive that they are getting higher wages due to the rising prices. This perceived increase in real wage rates makes job opportunities seem more attractive, leading to increased employment.
Test: Fiscal Policy- 4 - Question 2
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What is the outcome of workers realizing that inflation is creating the illusion of more attractive wage offers?

Detailed Solution for Test: Fiscal Policy- 4 - Question 2
When workers realize that inflation is creating an illusion of higher wage offers, they become aware that the job opportunities they are accepting are not as attractive as they believed. As a result, employment declines as employees reject these opportunities.
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Test: Fiscal Policy- 4 - Question 3
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Which economic theory suggests that fluctuations in unemployment and inflation can be influenced by monetary and fiscal policy mix?

Detailed Solution for Test: Fiscal Policy- 4 - Question 3
Keynesian economics proposes that fluctuations in unemployment and inflation can be managed through a combination of monetary and fiscal policies. These policies can impact aggregate demand, production, unemployment, and inflation levels.
Test: Fiscal Policy- 4 - Question 4
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What is the "natural rate of unemployment" according to monetarist perspective?
Detailed Solution for Test: Fiscal Policy- 4 - Question 4
In the monetarist perspective, the natural rate of unemployment is the rate that exists due to normal frictions and imperfections in the labor market. It represents the minimum sustainable level of unemployment in the long run.
Test: Fiscal Policy- 4 - Question 5
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What concept suggests that people's expectations about wages change more quickly and lead to reduced trade-off between inflation and unemployment?
Detailed Solution for Test: Fiscal Policy- 4 - Question 5
Rational expectations theory posits that people form their expectations about economic variables, such as wages, based on all available information. If expectations about real wages change quickly, there is a reduced trade-off between inflation and unemployment, as people adjust their behavior accordingly.
Test: Fiscal Policy- 4 - Question 6
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Which economic theory suggests that tax cuts can stimulate work efforts, savings, investment, and economic growth?
Detailed Solution for Test: Fiscal Policy- 4 - Question 6
Supply-side economics proposes that tax cuts can provide incentives for individuals to work, save, invest, and contribute to economic growth. By reducing tax burdens and increasing after-tax returns, supply-side policies aim to enhance economic activity.
Test: Fiscal Policy- 4 - Question 7
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What effect does an increase in government regulations have on aggregate supply according to supply side economists?
Detailed Solution for Test: Fiscal Policy- 4 - Question 7
Supply-side economists argue that increased government regulations can lead to higher production costs, which reduces aggregate supply. This can result in higher prices and lower economic growth.
Test: Fiscal Policy- 4 - Question 8
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Which policy is recommended by Keynesians to break inflationary expectations and reduce cost-push inflation?
Detailed Solution for Test: Fiscal Policy- 4 - Question 8
Keynesians recommend adopting an incomes policy, where the government takes actions to limit increases in monetary wages, rents, interest rates, and profits. This helps reduce cost-push inflation and breaks inflationary expectations.
Test: Fiscal Policy- 4 - Question 9
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According to the provided text, what does the "common funnel theorem" suggest?
Detailed Solution for Test: Fiscal Policy- 4 - Question 9
The "common funnel theorem" suggests that the total aggregate demand determines the combination of outcomes for unemployment and inflation. The size of a demand management package, regardless of its fiscal-monetary mix, influences the combination of output, employment, and price movements.
Test: Fiscal Policy- 4 - Question 10
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What is the primary aim of a well-designed macroeconomic policy to control stagflation?
Detailed Solution for Test: Fiscal Policy- 4 - Question 10
The primary aim of a well-designed macroeconomic policy is to achieve a balance between controlling inflation and minimizing unemployment, especially during periods of stagflation. This involves judiciously managing fiscal and monetary measures to achieve stable economic conditions.
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