Question # 1

Wars new inventions, harvest failures, and change sin government policy are examples of.

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The business cycle

Economics models

Shocks

Opportunity costs

If government spending of Rs. 10 and a lump sum tax of Rs.10 is added, the empirical equation for the new IS curve becomes.

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Y = 285 + 20 I

Y = 270 - 10 i

Y = 285 - 50 i

Y = 210 - o.5 i

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 measured of GDP includes

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Non market goods such as home making and child rearing

The benefits of clean air and water

Estimated values of activity in the underground economy

Purchases and sales of goods produced in previous periods

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

The nominal interest rate minus the inflation rate is the

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Depreciation rate

Discount rate

Forward rate

Real interest rate

Which of the following macro economics variables is a cyclical.

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Real interest rates

Unemployment

Money supply

Consumption

Fractional unemployment arises when

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Unskilled or low skilled workers find it difficult to obtain desirable long term jobs

Labor must be reallocated from industries that are shrinking to areas that are growing.

Workers must search for suitable jobs and firms must search for suitable workers.

Output and employment are below full employment levels

Which of the following macro economic variables is the most seasonally pro cyclical.

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Expenditure on services

The unemployment rate

Expenditure on durable goods

The real wage

The marginal product of labor

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Is measured by the slope of the production function relating capital of employment

Is larger when the labor supply is relatively larger

Is smaller when the labor supply is relatively smaller

Decreases as the number of workers already employed increases

The substitution effect of a decrease in real interest rates is to cause a consumer to.

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Increase future consumption and decrease current consumption

Decrease future consumption and increase current consumption

Increase current consumption and increase saving

Decrease current consumption and increase saving.

In closed economic model aggregate demand is not sensitive to.

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Interest rates

Exchange rates

Price level

Tax policy

If the foreign interest rate is 12% while the domestic interest rate in 95 then the forward premium will be.

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1.3 %

12%

9%

3%

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

When desired national saving equals desired national investment what market is in equilibrium.

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The goods market

The money market

The foreign exchange market

The stock market

Economists use the phrase ceteris paribus to express the assumption.

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All else equal

Everything affects everything else.

Scarcity is a fact of life

There is no such thing as a free lunch

The equilibrium level of Y and I derived from the LM and IS equations above is.

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Y = 130 and I = 10%

Y = 200 and I = 30%

Y = 180 and I = 7%

Y = 250 and I = 2%

If a Canadian dollar costs 0.75 in terms of U.S. dollars, how much Canadian money would an American need to spend in Canada to get a dollar's worth of U.S. value.

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25$

99$

Rs.1.25

Rs.1.13

The long term demand for real money balance will rise when

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the income elasticity of the demand for money is less than unity.

There is a long term increase in the price level

There is a relative increase in the stock of government securities.

Long term market interest rates are falling.

The Laffer curve depicts

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A trade off between tax rates and government receipts

Price levels and real income

government deficits and unemployment

Tax rates and infixation

In the Keynesian model in the short run a decrease in government purchases causes output to _____ and the real interest rate to.

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fall ; rise

fall ; fall

rise ; rise

rise; fall

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