Question # 1

In a mixed economy the economic decisions of what to produce how to produce, and who will receive products are made by

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The government

Consumers and firms

Banks and stock markets

Firms, consumers, and government.

A Rs.10 increase in autonomous investment spending shifts is.

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Rightward by Rs. 10

Leftwards by Rs. 10

Rightward by Ke (Rs.10)

Leftward y Ke (Rs.10)

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

If the federal reserve whishes to increase the money supply, it should

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Raise the reserve requirement

Raise the discount rate

Buy Treasury securities in the open the market

All of the above

Which of the following will not result in an increase in the level of income.

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An increase in autonomous spending

A decrease in autonomous taxes

An increase in autonomous transfers

an increased in net tax revenues

While resources and products flow in one direction of the circular flow model what flow the other direction.

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Services

Public goods

Money

Imported goods

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

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

The value of real GDP in the current year equals.

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The value of current year output in prices of the base year

The value of current year output in pries of the current year

The value of base year output in prices of the base year

The value of base year output in prices of the current year

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

The low point in the business cycle is referred to as the

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Expansion

Boom

Trough

Peak

A group of modern economists who believe that price and wage rigidities do not provide the only rationale for macroeconomic policy activism are called.

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New Keynesians

Keynesians

Monetarists

The Classical shool

Which one of the following would cause demand pull inflation.

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Increases iin production costs

Wage gains in proportion productivity gains

An increase in aggregate demand with shortages of sup ply

Monoposonistic labor markets

The MPS = 0.4 and government spending increases by 20 billion. The LM curve

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Shifts to the right by 20 billion

Shifts to the right by 50 billion

Does not shift

shifts to the left by 30 billion

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

When all markets in the economy are simultaneously in equilibrium we say.

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Markets are complete

Markets are perfect

There is disequilibrium

There is general equilibrium.

In market economics the incentive that draws entrepreneurs into industry is.

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Government bonuses for meeting production quotas

Profit

Government assumption of the risk of failure

Government assistance with making output and pricing decisions

Which of the following changes shifts the long run aggregate supply curve to the right.

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A demographic change that increases the labor supply

A decrease in the demand for labor

An increase in consumer confidence

A decrease in taxes

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

Under law of demand.

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Price of commodity is an independent variable

Quantity demanded is a dependent variable

Reciprocal relationship is found between price and quantity demandded

All of the above

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.

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