Question # 1

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

If the price level for an economy was 100 in 1984 , 115 in 1985 and 125 in 1986 the rate of inflation between 1985 and 1986 was.

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105

8%

8.7%

17.5%

"An Enquiry into the Nature and causes of wealth of Nations" is thebook of economist.

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Adam smith

Marshall

Robbins

None of above

The two main characteristics of the production function are.

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It slopes downward from left to right and the slope become flatter as teh input increases

It slopes upward from left to the right the slope becomes steeper as the input increase

It slopes upward from left to right unput increases

It slopes downward from left to right and the slope becomes steeper ath the input increase

The Keynesian theory is consistent with the business cycle fact that inflation is

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Procyclical and leading

Procyclical and lagging

Countercyclical and leading

All of these

The nominal interest rate minus the inflation rate is the

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Depreciation rate

Discount rate

Forward rate

Real interest rate

When an increase in government spending is matched by an equal decrease in government transfers, the income level will.

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Stay the same

Increase

Decrease

All of the above

A decrease in the effective tax rate on capital would cause the IS curve to.

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Shift up and to the right

shift down and to the left

Remain unchanged

Remain unchanged if taxes are fully deducible from income otherwise, shift up and to the right

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

When GNP is Rs.500 billion and consumption expenditures are Rs.300 billion.

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the MPC is 6

The MPS is 4

The Multiplier is 2.5

None of the above

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

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

The Root Mean square Error for the actual sales and sales forecast for 1985 and 1986 is.

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20.2

19.9

14.7

17.2

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 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 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

Which of the following changes shifts the SRAS curve up.

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Ani increases in the labor force

A decrease in government purchases

An increase in firms costs

An increase in the money supply

The equation for the LM curve is.

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Y = 100 -50 i

Y = 50 + 50 i

Y = 50 - 80 i

Y = 80 + 50 i

To ensure that the fundamental identity of national income accounting holds changes in inventories are.

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Ignored

Counted as consumption

Treated as part of saving

Treated as part of expenditure

If the demand for coffee decreases as income decreases, coffee is a

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Normal good

Inferior good

Substitute good

Complementary good

In the long run an increase in consumer spending would cause output to ________ and the price level to.___________

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rise;rise

rise; stay; constant

stay constant ; stay constant

Stay constant ; rise

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