Question # 1

When the Central Bank initiates actions which will lead to an increase in the supply of money IS -LM models tell us to expect that.

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The interest rate will rise

The interest rate will decline

The price level will not change

Investment will decline

Suppose there is full employment and a neoclassical aggregate supply schedule A 105 increases in the nominal money supply.

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Has no effect upon the price level

Increase the rate of interest

Increase the nominal wage 10%

Increase the real money supply 10%

If the intercept of the consumption function is 75, and MPS is 0.10 the value of consumption expenditures at Yd = Rs. 5,000 is

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Rs.4,500

Rs. 575

Rs.500

Rs. 4,575

Industries that are extremely sensitive to the business cycle are the.

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Durable goods and service sectors

Nondurable goods and service sectors.

Capital goods and nondurable goods sectors.

Capital goods and durable goods sectors.

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis which of the following curves is vertical.

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SRAS

AD

LRAS

None of the above

Economic planning by enteral government agencies is primarily associated with

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command economies

Market economies

Laissez faire economies

Market faire economies

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

Classical economics believe that in the short run.

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Money neutrality exists and prices adjust rapidly

Money neutrality does not exist and prices adjust rapidly

Money neutrality exists and prices do not adjust rapidly.

Keynes and Say's macroeconomic theory of employment were diametrically opposed Say state that.

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Supply creates demand

Demand creates supply

Unemployment is a most likely state of affairs

Full employment can only be achieved by government interference.

All of the following are obstacles to international economic policy coordination except.

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Different national objectives are institutions

Different national political climates

Different phases in the business cycle

Different national currencies.

"Economics is what economists do " It has been supported by.

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Richard jones

Comte

Gunnar Myrdal

All of the above

In the short run an increase in export sales would cause output to ______ and the price level to.

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Rise, rise

Rise,; stay; constant

Fall; rise

fall; stay; constant

Ahmed uses dummy variables in order to determine the monthly seasonal effect in her regression model. The number of dummy variables used will be.

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5

11

12

1

Which market adjusts the quickest in response to shocks to the economy.

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The asset market

The labor market

The goods market

In the macro economy

Which of the following represents monetary policy geared to increases the supply of money.

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The purchase of bonds by the Federal Reserve Bank

The sale of bonds by the Central Bank

An increase in reserve requirement

A decrease in taxes

Which of the following is the most liquid.

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A savings account

A 6 months CD

A home

Water

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

In which of the following situations will an increase in the money supply have no effect upon equilibrium income.

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LM is steeply sloped and IS is relatively flat

LM is vertical and IS si steeply sloped

LM is steeply sloped and IS is vertical

LM is relatively flat as is IS

When aggregate economic activity increasing the economy is said to be in.

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An expansion

A contraction

A peak

A turning point

The use of micro economics policies to smooth or moderate the business cycle is known as.

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Aggregate demand management.

Aggregate supply management

Automatic stabilization

Discretionary policy

An increase in the number of workers hired by a firm could result from

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a decrease in the marginal product of labor

a decrease in the marginal revenue product of labor

An increase in the real wage

A decrease in the real wage

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