Question # 1

The Keynesian model is a good guide to ______ behavior and the classical model describes behavior in.

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^{Long run, short run}

Flexible, imperfect markets

Short term , long run

Ong run, imperfect market.

Real GNP measures income

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Including non market activities

Adjusted for inflation

Including externalities

Including tax evasion

Under floating exchange rates, expectations of higher interest rates are likely to cause an __________ of the exchange rate.

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Depreciation

Appreciation

fall

Devaluation

The impossibility of negative gross investment provides a______ to fluctuations in.

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Celling, stock building

Celling, capital prices

floor , output

floor , the capital output ratio

the Maastricht criteria for entry to the EMU are that applicants should have

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Low inflation

Low interest rates

Stable nominal exchange rate

All of the above

Within circular flow of income, an increase in domestic income iwll lend to increase.

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Exports

Taxes

Inventories

Imports

In a competitive industry each buyer and seller.

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Is a price taker

Produce different products

Believes that can influence price

Prevents the entry of competitors

In the short run the level of floating exchange rates is determined mainly by.

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Interest rates

Competitiveness

Trade

Speculation

The prisoners Dilemma Game demonstrates that.

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Players are better off to act independently

Monopoly is better than competition

People will always cheat

Players are better off if they con operate

A current account deficit means that a country may.

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Reduce its stock of foreign assets

Increases its stock of foreign assets

Increases its savings

Increases its foreign currency reserves.

Monetarists believe that a reduction in _____ can be achieved by reducing.

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Unemployment, prices

Inflation, wages

Unemployment, wages

Inflation, the quantity of nominal money

International specialization takes place because of.

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Differences in technology

Differences in factor endowments

Scale economies

All of the above

The abolition of income tax would probably ________ the number of workers in employment and____________ the equilibrium. rate of unemployment.

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increase ; decrease

increase ; increase

reduce ; increase

reduce ; reduce

Real business cycle are cycles in

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Potential output

Actual output

Real output

International trade

In the economy when a steel producer sells steel to car producer it is regarded as.

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A final good

An intermediate good

an injection

a leakage

If a person thinks they are better off after a 10% wage increase, and all prices have risen 10%, then they are experiencing.

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Inflation

A supply shocks

Crowding out

Inflation illusion

When real income increases, other things equal we fan expect the demand for real money holdings to.

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Fall

Not change

Increase

Decrease

If a price increase of good A increases the quantity demanded of good B, then good B is a.

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substitute good

Complementary good

Bargain

Interior good

Injection into the circular flow are _________ and _______

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Consumption, investment, exports

Investment exports, transfer payments

Investment government expenditure, exports.

Taxes, exports, transfer payments.

If the central bank buys financial securities in the open market to increase the monetary base, this is an example of.

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Lender of last resort

Financial intermediation

Open market operations

Financial regulation.

If goods are exported for less than society's marginal production cost and the marginal benefit to domestic consumers, it is likely that they benefit from.

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An import subsidy

A quota

Comparative advantage

An export subsidy

Real business cycle theorists argue that ___________ can explain short and long term fluctuations in output.

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Imperfect labour markets

Rational expectations

Intertemporal decisions of households firms and government.

Sun spot cycles

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