Chapter 7 – Introduction to Macro Economics
Select the correct option
- The terms Micro Economics and Macro Economics were coined by
- Adam Smith .
- PA Samuelson.
- Alfred Marshall.
- Ragner Frisch .
- Who is known as father of modern Macro Economics ?
- Adam Smith .
- Alfred Marshal.
- J.M Keynes.
- J.B Say .
- Household, Firm, Government and
- Export .
- External sector.
- Import sector.
- Macro sector .
- ‘The General Theory of Employment, Interest and Money’ is the book written by
- Alfred Marshal .
- Ragner Frisch.
- Adam Smith.
- JM Keynes .
- The ‘Great Depression’ started in the year
- 1730 .
- 1830.
- 1929.
- 1829 .
- ‘The General Theory of Employment, Interest and Money’ was published in the year
- 1736 .
- 1836.
- 1629.
- 1936 .
- Macro Economics is also known by the name
- Price Theory.
- Cost Theory.
- Theory of income and employment.
- Demand Theory .
- The expenses which raise productive capacity is known as
- Consumption expenditure.
- Investment expenditure.
- Export expenditure.
- Public expenditure .
- Income of a family, Production of rice, Gross domestic saving, profit of a firm
- Price of rice, saving of an individual household, profit of a firm, whole sale price level
- Aggregate units, worm’s eye view, bird’s eye view, general equilibrium analysis.
- Classify the following economic variables under suitable heads.
International trade, price theory, economic growth, partial equilibrium, aggregate demand, allocation of reasources.
Answer:
Table 1.1 Micro Economics. Macro Economics. Price theory International trade Partial equilibrium Economic growth Allocation of resources Aggregate demand - What would come in the place of question mark ?
- Wealth of Nations : 1776
- The General Theory : ?
- ? : Economy as a whole
- Micro economics : Individual units
- Dream land is an imaginary country. It does not import or export. It does not allow foreign investment. It does not borrow from abroad. What do you call this type of economy ? Is it good to have such an economic system ? Comment your opinion.
- List out the important features of Great Depression of 1930’s.
- Some variables are given below. Classify them under two branches of economics.
- Point out the significance of the study of Macro Economics.
- Helpful to understand thefuncctioning of the economy.
- Helpful in comparison of various economies.
- Useful in planning and forecasting.
- Helpful in studying growth and development.
- Helpful in studying the fluctuations of the economy.
- Helpful in formulating various policies and programmes.
- Who is considered the key figure behind the emergence and popularity of macroeconomics ?
- How you identify an open economy ?
- According to the Macro Economic point of view there are four major sectors in an economy. Name these sectors.
- Households.
- Firms.
- Government.
- External Sector.
- How did the Great Depression contribute to the rise of Keynesian economics and the decline of classical economic theories ?
- Give brief description about the emergence of Macro Economics ?
Answer:
D. Ragner Frisch
Answer:
C. J.M Keynes
Answer:
B. External sector
Answer:
D. JM Keynes
Answer:
C. 1929
Answer:
D. 1936
Answer:
C. Theory of income and employment
Answer:
B. Investment expenditure
Find the odd one out
Answer :
Gross domestic saving, others are micro economic indicators.
Answer :
Whole sale price level, others are micro economic indicators.
Answer :
Worm’s eye view, others are features of macro economics.
-
A.
B.
Answer :
A. (b) 1936
B. (a) Macro Economics
Answer :
This type of economy is called ‘closed’ economy. A closed economy can not grow fast like an open economy do and will be an undeveloped economy. It will not get all the benifits of international trade. A closed economy is undesirable.
Answer :
Unemployment, fall in aggregate demand, credit crisis, economic contraction were the immportant features of Great Depression.
Utility, GDP, Average cost, Inflaation, Partial analysis, Demand for a pen, Aggregate consumption, Taxes.
Answer :
| Table 1.2 | ||||||
|---|---|---|---|---|---|---|
| Micro Economics | Macro Economics | |||||
| Utility | GDP | |||||
| Demand for a pen | Inflation | |||||
| Partial analysis | Aggregate consumption | |||||
| Average cost | Taxes | |||||
Answer :
Answer :
John Maynard Keynes is considered the key figure behind the emergence and popularity of macroeconomics.
Answer :
An open economy will have economic relations with other countries of the world . There will be specisalisation and international trade.
Answer :
Answer :
The Great Depression, which began in 1929 and caused widespread economic turmoil, disproved many classical economic theories, particularly the belief in the ‘invisible hand’ of market forces and automatic full employment. The severe economic contraction and skyrocketing unemployment demonstrated the inadequacy of laissez-faire policies and the classical idea that supply creates its own demand. In response to this crisis, John Maynard Keynes introduced his revolutionary ideas in ‘The General Theory of Employment, Interest and Money’ (1936), which provided a new macroeconomic framework. Keynes argued for active government intervention to manage demand and ensure economic stability, marking a significant shift from classical to Keynesian economics. This shift, known as the Keynesian Revolution, played a crucial role in the emergence and popularity of macroeconomics.
Answer :
The emergence of macroeconomics can be traced to the work of John Maynard Keynes, particularly his 1936 book, ‘The General Theory of Employment, Interest and Money.’ Although the macro approach to analyzing the economy existed before, Keynes revolutionized it by challenging the dominant classical economic theories. Classical economists believed in laissez-faire policies and argued that market forces would naturally ensure equilibrium and full employment. However, the Great Depression of the 1930s, which led to severe economic contraction and widespread unemployment, disproved these ideas. Keynes introduced a new macroeconomic framework that emphasized the importance of government intervention in managing demand and stabilizing the economy, leading to the rise and popularity of macroeconomics.
