Economics 3 Marks Question

Full employment is a situation in which all those who are able and willing to work at given wage rate find work.

Deflationary gap refers to a situation when AD falls short of AS at full employment.

When aggregate demand is higher than aggregate supply at full employment, the gap is called inflationary gap.

Higher rates of taxes can be levied on higher incomes and lower rates of taxes can be levied on lower incomes. More expenditure can be incurred on providing free services like education, health, etc. to the poor.

Microeconomics studies the behaviour of individual economic agents/units.

The economy in which the central problems are solved by the government through planning.

Voluntary unemployment is that part of the working force not willing to engage itself in gainful occupation whereas Involuntary unemployment is that part of the labour force which is willing and able to work at the prevailing wage rate but is out of work.

It is the value of the best alternative foregone.

Choice of technique at the micro level, every economy has to face three central problems, i.e.

1. What to produce: The first problem that an economy faces is to decide which goods and services are to be produced. Besides this, the economy also needs to decide in what quantities these goods and services should be produced
2. How to produce:It is concerning with, how to organise production. This problem is related to the choice of technique of production. It arises due to the availability of various techniques for the production of a commodity such as labour intensive technique and capital intensive technique. Depending upon the availability of resources, either technique is used.
3. For whom to produce:This economic problem basically focuses on the distribution mix of the final goods and services produced. The distribution of the final goods and services is equivalent to the distribution of National Income (or National Product) among the factors of production such as land, labour, capital and entrepreneur.

Study of consumer’s equilibrium, producer’s equilibrium, etc.

Unlimited wants and scarce resources having alternative uses.

It refers to the problem of distribution of income.

National Income, Unemployment, inflation etc.

Macro economics is the study of aggregates of an economy.

That branch of economics which deals with behaviour of aggregates relating to the economy as a whole.

There are some incomes which cannot be conveniently divided into distinctive factor incomes.Such income arises to the self-employed like practicing lawyers, doctors, etc. Take for example a practising lawyer. The fees charged by the lawyer is not only his wages but also interest of capital employed by him, rent of his office and profit of his entrepreneurship. Since no data is available to sub-divide the lawyer’s fees into wages, rent, interest and profit, it is called mixed income.

When aggregate demand and aggregate supply are equal at below full employment level, it is called under-employment equilibrium.

Stocks are economic variables measured at a point of time.
Flows are economic variable measured over a period of time.
Example:

Aggregate supply is the value of total quantity of final goods and services planned to be produced in an economy during a period.

Aggregate supply is the value of total quantity of final goods and services planned to be produced in the country during the year.

Full employment is a situation in which all those who are able and willing to work at the prevailing wage rate find work.

When people who are able and willing to work at the prevailing wage rate, do not get employment, it is a situation of involuntary unemployment.

Economy refers to the whole collection of production units in an area by which people get their living.

Excess of Aggregate supply over aggregate demand at full employment level.

Refers to that part of labour force which is able to work and willing to work at prevailing wage rate but is not able to find work.

1. Demand by a consumer.
2. Price determination of a commodity.

The problem arises due to:

1. Limited resources

Resources, ie. land, labour, capital, etc. are available in limited quantities in an economy and cannot produce all what people want.

2. Unlimited wants

Wants of the people are unlimited and keep on multiplying and cannot be satisfied due to limited resources.

3. Resources have alternative uses

A resource can be used for producing more than one product. This creates a problem. Which product should be produced or which want should be satisfied first.

Involuntary unemployment means that part of the labour force which is both able and willing to work at the prevailing wage rate but do not get work.

This problem involves selection of goods and services to be produced and the quantity to be produced of each selected commodity. Every economy has limited resources and thus, cannot produce all the goods. More of one good or service usually means less of others. For example, production of more sugar is possible only by reducing the production of other goods. Production of more war goods is possible only by reducing the production of civil goods. So, on the basis of the importance of various goods, an economy has to decide which goods should be produced and in what quantities. This is a problem of allocation of resources among different goods.

Study of aggregate demand, aggregagate supply, unemployment, inflation, etc.

It indicates growth of resources.Alternate Answer
Advancement of technology.

Because the problem relates to the economy as a whole.

In macroeconomics, we study how the level of income, output and employment are determined in an economy and how unemployment can be removed.

Final product.
Reason: It is a final product as it is used by households for final consumption.

Consumer goods.
Reason: End user is consumer.

Excluded.
Reason: As it is outside the domestic territory of our country.

Transfer income.
Reason: It is received without rendering any productive services.

Macroeconomics is the study of the behaviour of aggregates covering the entire economy such as national income, full employment, unemployment, aggregate consumption, aggregate demand, aggregate supply, general price level etc.

The two examples of macroeconomic variables are:

1. National income.
2. Level of employment.
3. Aggregate investment.
4. Aggregate consumption.

False.
Explanation:
It depends on the use of bread. When it is purchased by a household, it is a consumer good. If it is purchased by a restaurant, it is a producer intermediate goods.

Flow concept.
Reason: It is related to a period of time.

Excluded.
Reason: As it is outside the domestic territory of our country.

Transfers made from the current income of the payer and added to the current income of the recipient (who receive) for consumption expenditure are called current transfers.

Flow concept.
Reason: It is related to a period of one month or one year.

Production Phase, Distribution Phase and Disposition Phase.

It refers to flow of money income or the flow of goods and services across different sectors of the economy in a circular form.

These are those which are used for:

1. Personal consumption (like bread purchased by consumer household).
2. Investment or capital formation (like building, machinery purchased by a firm).

Capital goods are defined as all goods produced for use in future productive processes.