Question # 1

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

When the price level increases 25% starting from a price level equal to 100, a Rs. 1000 bond will have a real value of .

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Rs. 800

Rs.1250

Rs.750

Rs.666

Ahmed regression model yields a Durbin Watson d statistic whose value is 0.002. The results indicate.

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Positive serial correlation

the presence of multicollinearity

No serial correlation

Negative serial correlation

In the long run an increase in government purchases of military equipment would cause output to _________ and the aggregate price level to

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Stay constant fall

fall ; fall

fall ; stay constant

stay constant ; rise

The fraction of additional current income that a person consumes in the current period is known as the

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Consumption smoothing motive

Consumption deficit

Saving rate

marginal propensity to consume

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

If the expected rate of inflation rose at the same time the natural rate of unemployment rose the Philips curve.

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would shift down

would shift up

Would not move

Might shift up or down or not move depending on which effect was larger.

An increase in the expected rate of inflation would.

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shift the Philips curve upward

shift the phillips curve downward

Shift the long -run phillips curve to the right

Shift the long-run phillips curve to the left

Which of the following macro economic variables doesn't vary much ove the seasons.

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The nominal money stock

The unemployment rate

The real wage

Average labor productivity

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.

What did economist Adam Smith identity as the "invisible hand" that directs the decision making of firms and households in a market economy.

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Government

Product demand

Self interest

International trade

According to Keynesian macro economics price adjust _____ to shocks, so the government should.

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Slowly ; do little

Rapidly ; do little

Rapidly ; fight recessions

Slowly ; fight recessions

The fact that the Production function relating output to capital becomes flatter as we move from left to right means that.

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The marginal product of labor is positive

The marginal product of capital is positive

There is diminishing marginal productivity of labor

There is diminishing marginal productivity of capital

According to the efficiency wage model during a recession firms will not reduce real wages because.

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Unions would go on strike reducing profitability

This would reduce worker effort and productivity.

The equilibrium real wage has increased

Legally, they can't

Equilibrium occurs in a two sector model when

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Saving equals investment.

Consumption plys investment equals the value of putput

Planned saving equals planned investment.

Aggregate spending equals the revenues of the business sector

In the long run a reduction in labor supply would cause output to _______ and the aggregate price level to.

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fall; rise

fall ; fall

rise ; fall

rise; rise

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

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

At point of satiety marginal utilityis.

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Positive

Negative

Maximum

Zero

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

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

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