Question # 1

An increase in the expected real interest rate tends to.

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Raise desired saving only

Raise desired investment only

Raise both desired savings and desired investment

Raise desired savings, but lower desired investment.

A change that increases the real money supply relative to real money demand causes.

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The LM curve to shift down and to the right.

The LM curve to shift up and to the left

The IS curve to shift down and to the left

The IS curve to shift up and to the right.

Which policy is an expenditure switching policy.

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Increase in the money supply

Decrease in government expensitures

Increase in business and household taxes

Decrease in import tariffs

Which of the following is not included in gorses investment.

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Business and residential constrcution.

Expenditures on consumer goods

Additions to business inventory

Expenditures on machinery

An increase in autonomous net exports

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Shifts IS rightward by k, ox

shifts IS left eard by k, AX

Increase the slope of IS

Decreases the slope of IS

Capital goods are

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A type of intermediate good

Final goods, because they are not used up during a given year

Produced in the same year as the related final good whereas intermediate goods are produced in different years.

Produced in one year whereas final goods are produced over a period of more than one year

Appreciation of the U.S. dollar results in.

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U.S. tourists traveling abroad being worse off

U.S. imports increasing.

Foreign currency buying more U.S. goods and services.

No change iin foreign pucchases or sales.

After a temporary beneficial supply shock hits the economy general equilibrium is restored by

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A shift down and to the left of the IS curve

A shift to the left of the FE line

A shift up and to the left to the LM curve

A shift down and to the right of the LM curve

The multiplier which specifically refers to an equal increase in government spending and taxes, giving rise to that same equal increase in national income is called.

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the Keynesian multiplier

The balanced budget multiplier

the deficit multiplier

None of the above

Changes in subjective or objective factors.

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Never affect the consumption function

Always cause downward shifts of the consumption function

Always cause upward shifts of the consumption function

May cause upward or downward shifts of the consumption function

The long run foreign exchange rate between the U.S. and Japan is 200 Yen =Rs. 1 under a floating exchange rate Which of the following does 112 t occur if the Federal Reserve reduce the money supply in order to prevent the occurrence of inflation.

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Foreign capital flows to the U.S.

The U.S. dollar appreciates

Real net exports decline

American real GNP experience a slower rate of growth

When the marginal propensity to consume is 0.75 the multiplier has a value of.

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4

5

3

2

The efficiency wage model can be modified to allow real wages to vary over the business cycle by assuming that.

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Workers effort may depend on the unemployment rate and the real wage

During a recession labor supply will decrease reducing the efficiency wage

During a recession productivity wil fall causing a reduction in the efficiency wage

During a boom labor demand will increase, causing the efficiency wage to rise

An increase in wealth that doesn't affect labor supply would cause the IS curve to _________ and the FE line to ____________

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Shift down and to the left be unchanged

Shift down and to the left shift left

Shift up and to the right be unchanged

Shift up and to the right shift left

An increase labor supply would cause the IS curve to.

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Shift up and to the right

Shift down and to the left

Remain unchanged

Shift up and to the right only if people face borrowing constraints

In the Keynesian model which curve is vertical.

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LRAS

SRAS

AD

NS

Which of the following is an economic activity.

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Teaching of a teacher in the school.

To teach son at home

To serve her child by mother

to play foot ball by a student

A beneficial supply shock would cause.

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A movement up the short run Phillips

a movement down the short run Phillips curve

The short run Phillips curve to shift upward and to the rights

The short run Phillips curve to shift down ward and to the left

What is the average money balance according to the square root rute if income is Rs.1500, each transaction cost is Rs.4, and the opportunity cost of holding money is.2%

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387

50

175

203

A technological improvement will

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Increases the desired capital stock

Decrease the desired capital stock

Have no effect on the desired capital stock

Have the same effect on the desired capital stock as an increase in corporate taxes.

Which of the following will not result in an increase in the level of income.

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An increase in autonomous spending

A decrease in autonomous taxes

An increase in autonomous transfers

an increased in net tax revenues

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