Question # 1

If an individual has a money income M of Rs. 999 , the price of X is rs.7.00 per unit and ithe price of Y is Rs. 300 per unit find the equation for the budget lines.

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Y = 333 - (7/3) x

Y = 142 - (7/3) x

Y = 142- (3/7) x

Y = 323 - (7/3) x

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

Total factor productivity growth is that part of economic growth due to.

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Capital growth plus labor growth

Capital growth less labor growth

Capital growth times labor growth

Neither capital growth nor labor growth

If sales are forecasted using an adaptive expectations model where the coefficient of adjustment .2, the sales forecast for 1986 is.

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Rs.260

Rs.244.4

Rs.3.6

Rs.283.6

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 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 macro economic variables doesn't vary much ove the seasons.

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The nominal money stock

The unemployment rate

The real wage

Average labor productivity

The impact of contractionary fiscal policy, according to new classical theory is that.

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Real interest rates do not change

Aggregate demand increase

Current real output substantially decreases

The price level substantially increases.

If the price level for an economy was 100 in 1984 , 115 in 1985 and 125 in 1986 the rate of inflation between 1985 and 1986 was.

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105

8%

8.7%

17.5%

Net National product equals.

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Gross national product minus indirect business taxes

Gross national product minus depreciation

National income minus indirect business taxes

National income pluses depreciation

An adverse supply shock that is permanent shifts which curve in addition to the curves shifted by.

One that is temporary.

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The LM curve

The IS curve

The FE line

The labor demand curve

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

Suppose nominal GNP is Rs.500 in year 1, the base year If the GNP deflator doubles by year 6 while real output has increased 40% nominal output in year 6 equals.

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Rs.2000

Rs.1400

Rs.1000

Rs.750

The equation for the IS curve is.

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Y = 55 - 50 i

Y = 175 - 75 i

Y = 300 - 100 i

Y = 275 - 25 i

In a model in which there is no government new investment capital replacement or international trade the market value of final output equals.

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Aggregate consumption

The sum of the receipts of economic resources

The sum of wages rent interest and profit

All of the above

In the Keynesian model in the long run a decrease in the money supply will cause ___ in the interest rate and _____ in the price level.

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An increase ; an increase

A decrease ; a decrees

No change ; an increase

No change ; a decrease

Desired national saving would increase unambiguously if there were

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An increase in current output and expected future output

An increase in expected future output and government purchases

An increase in expected future output and the expected real interest rate

A fall in both government purchases and expected future output

The expected real interest rate minus expected inflation rate.

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Nominal interest rate minus inflation rate

Nominal interest rate minus expected inflation rate.

Expected nominal interest rate minus inflation rate

Nominal interest rate plus expected inflation rate.

By definition, the marginal propensity to consumes.

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Equals OC/A Yd

Is the behavioral coefficient c in the equation C = C + cYd

Is the slops of the consumption function.

All of the above

In closed economic model aggregate demand is not sensitive to.

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Interest rates

Exchange rates

Price level

Tax policy

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

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