Question # 1

Which of the following assets is most liquid.

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Shares of stock in IBM

Land

Gold

Currency

"Economics is a science " the basis of this statement is.

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Relation between causes and effect

Use of deductive method and inductive method for the formations of laws

experiments

All of the above

A disadvantage of the barter system is that

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No trade occurs

People must produce all their own food clothing and shelter

The opportunity to specialize is greatly reduced.

Gold is the only unit of account

Firms hire labor at the point where the

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Nominal wage rate equals the marginal product of labor

Real wage rate equals the marginal revenue product of capital

Nominal wage rate equals the marginal revenue product of labor

Real wage rate equals the marginal revenue product of capital

According to classical economists unemployment rises in recessions due to an increase in ______ unemployment , not in _______ unemployment.

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Cyclical ; frictional and structural

Frictional and cyclical , structural

Structural , frictional and cyclical

Frictional and structural ; cyclical

Suppose there is full employment and positively sloped aggregate supply schedule A decrees in taxes increases.

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The price level and real output

the prie level but has no effect on real output

Real output but has no effect on the price level

The nominal and real wage

Classical economics think general equilibrium is attained relatively quickly because.

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The real interest rate adjusts quickly

The level of output adjusts quickly.

The real wage rate adjusts quickly

The price level adjusts quickly.

If the economy is in equilibrium at Rs. 180 billion and taxes are reduced by Rs.20 billion, find the new equilibrium given that this is a simple economy i.e. exogenous government spending tax collection and investment spending and a marginal propensity to consume of . .75

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60

200

250

240

Peaks and trough of the business cycle are known collectively as.

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Volatility

Turning points

Equilibrium point

Real business cycle events

For a borrower an increase in the real interest rate will lead to.

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Higher current consumption and less borrowing

Higher current consumption and less saving

Lower current consumption and less borrowing

Lower current consumption and less saving

Company X sells Rs.75 million dollars of 9.5% first mortgage bonds at par The company's marginal tax rate to 30% The after tax cost of debt is.

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2.85%

3.175

6.68%

7.55

The dynamic aggregate demand schedule shifts rightward when there is an increase in.

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The expected rate of inflation ceteris paribus

The growth rate of the nominal money supply ceteris paribus

The income tax rate ceteris paribus

the current inflation rate celeries paribus

If investors expectations concerning the future are positive and thus increase investment at every interest rate the.

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IS curve would shift up

IS curve would shift down

LM curve would shift down

IS and LM curves will not shift

The gift exchange motive suggests that

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Workers value benefits like health insurance more than job security

Workers prefer a nice work environment even if they must accept lower wages.

Workers who feel well treated will work harder and more efficiently

Workers will shirk if they are paid a low wage

An expansionary supply side shock results in.

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An increased real national income

The aggregate supply curve shifting to the left

The aggregate demand curve shifting to the right

The aggregate demand curve shifting to the left

The hypothesis would the tested with

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A two tailed test

A one tailed test with the rejection region in the left tail

a one tailed test with the rejection region on the right tail

The normal distiribution

A rise in the exchange rate value of the rupee will most likely cause.

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A dollar to be worth less in learns of other currencies.

Imports to decrease

Exports to increase

The balance of payments curve to shift to the left

When the value of output exceeds planned spending .

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There is unsold output, and the level of income will fall

there is unsold output and the level of income will rise

There is unsold output, and the level of income does not change.

All of the above

Fiscal policy output to change demand for output is.

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Completely effective in region KL

Partially effective in region JK

Elasticity is infinite for region LT

Completely ineffective in region LT

An economics variable that moves in the same direction as aggregate economic activity is called.

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Countercyclical

Procyclical

A cyclical

A leading variable

According to Okun's law an increase in the unemployment rate will cause_______ in the level of empolyment and __ in the level of output.

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An increase ; an increase

An increase; a decrease

A decrease ; an increase

a decrease ; a decrease

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