Question # 1

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

In the efficiency wage model if the real wage is higher than the market clearing wage so that there in an excess supply of labor.

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Firms will hire new workers at lower wages

Firms will replace high paid workers with low paid formerly unemployed workers

Employers will not hire workers who are willing to work for a lower wage.

Firms will demand a higher level of effort from existing employees

Ahmed uses dummy variables in order to determine the monthly seasonal effect in her regression model. The number of dummy variables used will be.

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5

11

12

1

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

The risk free rate of interest would not be affected by.

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Changes in real output

Change in the money supply

Term to maturity

None of the above

A disadvantage of chain weighting is that

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Past inflation rates change whenever the base year changes.

Past growth rates of real GDP change whenever the base year changes.

It causes output growth to slow

The components of real GDP don't sum to real GDP

If the quantity of money demands is less than the quantity of money supplied then the interest rate will.

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Either increases or decrease, depending on the amount of excess demand.

Increase

Decrease

not change

Which of the following will cause a monetary induced change versus a fiscal induced change in equilibrium income as determined.by IS - LM analysis.

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A shift in the consumption function

A shift in government expenditures

A change in liquidity preference

A change in a government expenditures

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.

Suppose your company is in equilibrium with its capital stock at the desired level A permanent decline in the expected real interest rate now has what effect on your desired capital stock

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Raises it because the future marginal productivity of capital is higher

Lowers it because the future marginal productivity of capital is lower

Raises it because the user cost of capital is now lower

Lowers it because the user cost of capital is now higher

The valued of expenditure multiplier relates.

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The change in autonomous spending to the change in income

the change in consumption to change in income

The change in come to the change is consumption

The change in income to the change in autonomous spending.

You are gold the level of savings in the economy is Rs.25 billion of equilibrium Using the consumption function C =20 + .9 Y, find equilibrium income .

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250

900

450

350

Which of the following methods is used for internalizaing positive externalities

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Positive taxes

Government exchange of property rights

Effluent fees

Corrective substidies

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

Marginal utility is equal to average utility at that time when average utility is.

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Increasing

Maximum

Falling

Minimum

A decline expected future output 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 constratints.

For interior commodities income effect is.

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Zero

Negative

Infinite

Positive

Hyperinflation occurs when

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The inflation rate rises

The inflation Tate declines

The inflation rate is extremely high

The inflation rate is extremely low

Which of the following is the second law of gossen.

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Law of equal marginal utility.

Law of equi product

Theory of indifference curve

Law of diminishing marginal utility.

An invention that speeds up the internet is an example of.

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An income effect

An increase in labor

A substitution effect

A supply shock

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