Cheap money policy involves loan or credit with a low interest rate, or the setting of low interest rates by the central bank of the country. Cheap money is good for borrowers, but bad for investors. Cheap money policy was one of the primary catalysts of the 2008 recession.

Correct Option: A

Cheap money policy involves loan or credit with a low interest rate, or the setting of low interest rates by the central bank of the country. Cheap money is good for borrowers, but bad for investors. Cheap money policy was one of the primary catalysts of the 2008 recession.

A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs of production and encourages them to increase output. Examples include a guaranteed payment on the factor cost of a product – e.g. a guaranteed minimum price offered to farmers; an input subsidy which subsidizes the cost of inputs used in production, etc. However, subsidies can be given to consuming units as well. Either way, it benefits the end use or consumer.

Correct Option: B

A subsidy is essentially a payment by the government to suppliers/producers that reduce their costs of production and encourages them to increase output. Examples include a guaranteed payment on the factor cost of a product – e.g. a guaranteed minimum price offered to farmers; an input subsidy which subsidizes the cost of inputs used in production, etc. However, subsidies can be given to consuming units as well. Either way, it benefits the end use or consumer.

According to Keynes’ psychological law of consumption, increased aggregate consumption due to increased aggregate income – aggregate consumption increases with increase in aggregate income but the increase in consumption is less than the increase in the income. This is because when the basic necessities or demand of the people are already fulfilled, they start saving the extra additional income.

Correct Option: A

According to Keynes’ psychological law of consumption, increased aggregate consumption due to increased aggregate income – aggregate consumption increases with increase in aggregate income but the increase in consumption is less than the increase in the income. This is because when the basic necessities or demand of the people are already fulfilled, they start saving the extra additional income.

The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desires of all human beings. The fundamental economic problem is how to allocate scarce resources to the provision of various goods and services within the economy. The question then becomes how to determine what is to be produced, and how the factors of production (such as capital and labor) are to be allocated.

Correct Option: D

The Theory of Economic Problem states that scarcity exists in the sense that only finite and insufficient resources are available to satisfy the needs and desires of all human beings. The fundamental economic problem is how to allocate scarce resources to the provision of various goods and services within the economy. The question then becomes how to determine what is to be produced, and how the factors of production (such as capital and labor) are to be allocated.

In economics, the law states that, all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases. So basically the quantity demanded and the price of a commodity is inversely related, other things remaining constant.

Correct Option: A

In economics, the law states that, all else being equal, as the price of a product increases, quantity demanded falls; likewise, as the price of a product decreases, quantity demanded increases. So basically the quantity demanded and the price of a commodity is inversely related, other things remaining constant.