Macroeconomics – 50 MCQs

Basic Concepts

1. Macroeconomics is the study of:

A) Individual economic units

B) Aggregate economic variables

C) Consumer behavior

D) Firm decision-making

Answer: B

2. The term “macro” is derived from the Greek word meaning:

A) Large

B) Small

C) Medium

D) Market

Answer: A
3. Who is considered the father of modern macroeconomics?

A) Adam Smith

B) Alfred Marshall

C) John Maynard Keynes

D) Karl Marx

Answer: C

4. The book “The General Theory of Employment, Interest and Money” was written by:

A) J.B. Say

B) Keynes

C) Ricardo

D) Milton Friedman

Answer: B

5. Microeconomics deals with:

A) Economy as a whole

B) Individual units

C) Government policies

D) National income

Answer: B
National Income

6. GDP stands for:

A) Gross Domestic Product

B) General Domestic Production

C) Gross Development Product

D) General Development Plan

Answer: A

7. Net National Product (NNP) =

A) GDP – Indirect Taxes

B) GNP – Depreciation

C) GNP + Depreciation

D) NDP + Subsidies

Answer: B

8. Real GDP is measured at:

A) Current prices

B) Constant prices

C) Factor cost

D) Market prices

Answer: B
9. Per capita income is:

A) National income / Total population

B) GDP / Working population

C) NDP / Adult population

D) NNP / Workforce

Answer: A

10. If GDP increases due to price rise only, it is known as:

A) Real growth

B) Nominal growth

C) Productive growth

D) Factor growth

Answer: B

Consumption, Savings, Investment

11. According to Keynes, the main determinant of consumption is:

A) Interest rate

B) Income
C) Savings

D) Investment

Answer: B

12. The relationship between income and consumption is called:

A) Consumption function

B) Saving function

C) Investment function

D) Demand function

Answer: A

13. The portion of income not spent on consumption is:

A) Savings

B) Investment

C) Capital

D) Expenditure

Answer: A

14. Investment refers to expenditure on:

A) Consumption goods

B) Capital goods

C) Imported goods

D) Intermediate goods
 Answer: B

15. The marginal propensity to consume (MPC) is:

A) ΔC / ΔY

B) ΔY / ΔC

C) C / Y

D) Y / C

Answer: A

Aggregate Demand & Supply

16. Aggregate Demand (AD) represents:

A) Total supply

B) Total spending in the economy

C) Total income

D) Total savings

Answer: B

17. Aggregate Supply (AS) represents:

A) Total income of the economy

C) Total production

D) Both income and output

Answer: D

18. When AD > AS, it leads to:

A) Inflation

B) Deflation

C) Unemployment

D) Stagnation

Answer: A

19. When AD < AS, the economy faces:

A) Inflation

B) Deflation

C) Boom

D) Overheating

Answer: B

20. Equilibrium level of income occurs where:

A) AD = AS

B) C = S

C) I = S
D) Both A and C

Answer: D

Inflation and Deflation

21. Inflation means:

A) Continuous rise in prices

B) Decrease in money supply

C) Fall in general prices

D) Stable prices

Answer: A

22. Deflation means:

A) Increase in general prices

B) Decrease in general prices

C) Increase in demand

D) Increase in wages

Answer: B

23. Cost-push inflation is caused by:

B) Increase in productivity

C) Decrease in money supply

D) Fall in demand

Answer: A

24. Demand-pull inflation occurs when:

A) AD < AS

B) AD > AS

C) AD = AS

D) AD is constant

Answer: B

25. Which index measures inflation in India?

A) GDP deflator

B) WPI / CPI

C) Industrial Index

D) Money Supply Index

Answer: B
Unemployment

26. Natural rate of unemployment includes:

A) Frictional and structural unemployment

B) Cyclical unemployment

C) Seasonal unemployment

D) None of these

Answer: A

27. Full employment means:

A) No unemployment at all

B) Zero unemployment

C) Only natural unemployment

D) Cyclical unemployment only

Answer: C

28. Cyclical unemployment is caused by:

A) Recession

B) Inflation

C) Structural change

D) Labor immobility

Answer: A
29. Structural unemployment occurs due to:

A) Lack of skills

B) Business cycle

C) Inflation

D) Wage rigidity

Answer: A

30. Frictional unemployment arises when:

A) Workers move between jobs

B) Skills are outdated

C) Wages are too low

D) There is government intervention

Answer: A

Fiscal Policy

31. Fiscal policy deals with:

A) Money supply

B) Government expenditure and taxation

C) Credit control

D) Inflation targeting
 Answer: B

32. Expansionary fiscal policy includes:

A) Increasing taxes

B) Decreasing spending

C) Increasing government expenditure

D) Increasing interest rates

Answer: C

33. Budget deficit means:

A) Revenue > Expenditure

B) Expenditure > Revenue

C) Expenditure = Revenue

D) Surplus Budget

Answer: B

34. Public debt increases when:

A) Government runs a surplus

B) Government runs a deficit

C) Government balances its budget

D) Taxes are high

Answer: B
35. Automatic stabilizers in fiscal policy include:

A) Progressive taxes and unemployment benefits

B) Defense spending

C) Infrastructure projects

D) Import tariffs

Answer: A

Monetary Policy

36. Monetary policy is controlled by:

A) Parliament

B) Finance Ministry

C) Central Bank

D) Government Treasury

Answer: C

37. The main objective of monetary policy is:

A) Price stability

B) Full employment

C) Economic growth
D) All of the above

Answer: D

38. Increasing the repo rate will:

A) Decrease money supply

B) Increase money supply

C) Increase inflation

D) Lower interest rates

Answer: A

39. Open Market Operations refer to:

A) Government buying and selling of goods

B) Central bank buying/selling securities

C) Foreign trade policy

D) Fiscal intervention

Answer: B

40. Quantitative tools of monetary policy include:

A) Repo rate and CRR

B) Credit rationing

C) Moral suasion

D) Direct controls

Answer: A
IS-LM and AD-AS Models

41. IS curve represents:

A) Equilibrium in goods market

B) Equilibrium in money market

C) Labor market

D) Capital market

Answer: A

42. LM curve represents:

A) Equilibrium in goods market

B) Equilibrium in money market

C) Savings function

D) Employment level

Answer: B

43. The intersection of IS and LM curves determines:

A) National income and interest rate

B) Prices and wages

D) Exchange rate

Answer: A

44. A rightward shift in IS curve indicates:

A) Increase in investment or government spending

B) Decrease in income

C) Fall in money supply

D) Tight monetary policy

Answer: A

45. A leftward shift in LM curve indicates:

A) Increase in money supply

B) Decrease in money supply

C) Fiscal contraction

D) Increase in interest rates

Answer: B

Balance of Payments & Exchange Rates

A) Only imports

B) Only exports

C) All economic transactions with rest of world

D) Government transactions

Answer: C

47. Current account includes:

A) Goods and services trade

B) Capital transfers

C) Foreign investments

D) Foreign aid

Answer: A

48. Devaluation of currency leads to:

A) Expensive exports

B) Cheaper imports

C) Cheaper exports

D) No change in trade balance

Answer: C

49. Exchange rate is the:

A) Price of foreign currency in terms of domestic currency

C) Tax rate

D) Money multiplier

Answer: A

50. Floating exchange rate is determined by:

A) Government

B) Central Bank

C) Market forces of demand and supply

D) IMF

Answer: C