Question # 1

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

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

Find the revenue the government collects as a result of the tax

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Rs.10 million

Rs.40 million

Rs.16 million

Rs.30 million

Classical economics think general equilibrium is attained relatively quickly because.

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The real interest rate adjusts quickly

The level of output adjusts quickly.

The real wage rate adjusts quickly

The price level adjusts quickly.

The equilibrium level of Y and I derived from the LM and IS equations above is.

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Y = 130 and I = 10%

Y = 200 and I = 30%

Y = 180 and I = 7%

Y = 250 and I = 2%

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)

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 major source of revenue for the government is.

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the collection of property taxes

The collection of the corporates income tax

The collection of excise taxes on gasoline cigarettes and tires

The collection of import and export duties in the conduct of foreign trade

In the efficiency wage model with the efficiency wage above the market clearing wage when employment is at its full employment level.

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Labor supply equals labor demand

There is an excess supply of labor

there is an excess demand for labor

There could be either an excess demand for or an excess supply of labor

During inflation.

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Lenders lose borrowers gain.

Borrowers lose , lenders gain

The real interest rate rises

Borrowers and lenders both lose.

Suppose the government provides a tax cut today that is matched by a tax increase in the future that's equal in present value to the tax cut This causes a consumer's saving to.

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Decrease

Increase

Remain unchanged

Increase if the person was a lender and decrease if the person was a borrower

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

A temporary decline in productivity 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 right only if people face borrowing constraints

Which of the following is incorrect with respect to the consumption diagram.

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the interest rate is a premium

MRS = (i +r)

The consumer will be lender in time zero

The consumer lends 700

"Economics is a science " the basis of this statement is.

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Relation between causes and effect

Use of deductive method and inductive method for the formations of laws

experiments

All of the above

The Laffer curve depicts

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A trade off between tax rates and government receipts

Price levels and real income

government deficits and unemployment

Tax rates and infixation

An economics variable that moves in the same direction as aggregate economic activity is called.

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Countercyclical

Procyclical

A cyclical

A leading variable

When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, the long run aggregate supply curve.

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slopes upward

Sloped downward

Is vertical

Is horizontal

The break even level of income where C = Y is

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200

300

500

400

Suppose there is full employment and a neoclassical aggregate supply schedule A 105 increases in the nominal money supply.

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Has no effect upon the price level

Increase the rate of interest

Increase the nominal wage 10%

Increase the real money supply 10%

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