Question # 1

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

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

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.

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

Whose opinions have revolutionized the scope of macro economics.

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Adam Smith

J.B. Say

J.M. Keynes

All of the above

At point of satiety marginal utilityis.

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Positive

Negative

Maximum

Zero

The ratio of the change in the equilibrium level of income to a change in some automats increase in spending is the

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Elasticity coefficient

Multiplier

Automatic stabilizer

Marginal propensity of the autonomous variable

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

A model in which individual producers act as price setters because there are only a few sellers and the product they sell is not standardized, is called.

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Imperfect competition

Perfect competition

Monopoly

Monopsony

Assuming that money is neutral an increase in the nominal money supply would causes.

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An excess supply for goods

an increase in the real money supply

A fall in the price level

A rise in nominal wages

In 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

Given the IS equation Y = Ke a - Ke Bn the IS slope decreases when

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Ke increase and b increases

Ke decreases and b increases

Ke increases and b decreases

Ke decreas4es and b decreases

An increase in total production causes the demand for money to _____ and the interest rate to ______

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Increase ; increase

Increase ; decrease

decrease ; decrease

decrease,; increase

When investment spending is negatively related to the rate of interest, equilibrium income in the goods market.

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Is unrelated to the rate of interest

Is positively related to the rate or interest

Inversely related to the rate of interest

Falls as the rate of interest decreases

Characteristics of economic laws are

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Mere statement of economic tenduencies

Less certain

Hypothetical

All of the above

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

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4

5

3

2

Suppose there is full employment and positively sloped aggregate supply schedule A decrees in taxes increases.

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The price level and real output

the prie level but has no effect on real output

Real output but has no effect on the price level

The nominal and real wage

Where there is an equal increase in net tax revenue and government spending, ceteris paribus.

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(C+I+G) is shifting upward

(C+I+G) is shifting downward

(C+I+G) does not shift

All of these

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

Full- employment output is the level of output that firms in the economy supply when

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Taxes are zero

Wages and prices have fully adjusted

The unemployment rate in zero

All capital is fully utilized

An economy is in inflationary equilibrium A sustained increase in government appending shifts.

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DAD rightward for one period

DAD and DAS right ward permanently

DAD right ward and a new equilibrium

DAD right ward and a new equilibrium.

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