Question # 1

What is the average money balance according to the square root rute if income is Rs.1500, each transaction cost is Rs.4, and the opportunity cost of holding money is.2%

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387

50

175

203

In the monetary base is increased by $1,000 and the reserve requirement is 10% by how much will the money supply be increased.

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$100

$1,000

$5,000

$10,000

Which of the following is a NOT component of M-2.

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Small time deposited

Money market mutual funds

Stocks

Checkable deposits

If the rate of growth of a full employment labor forc eis 1.55 and 2.55 then the celling rate of growth of real GNP, according to Hick's theory of a constrained business cycle,is.

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1.5 %

2.55

4.0%

1.7%

The natural rate of unemployed is generally thought of as the.

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Ratio of the frictional unemployment rate to the cyclical unemployment rate

sum of structural unemployment and cyclical unemployment

sum of frictional unemployment and cyclical unemployment

sum of frictional unemployment and structural unemployment.

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 nominal GNP were Rs.1000 ballooning 1976 and Rs.2200 billion in 1986, and the implicit GNP deflator was. 1.2 in 1976 and 1.6 in 1986 concluded that .

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Real GNP increased by approximately Rs. 542 billion from 1976 to 1986

The price level fell from 1976 to 1986

Real GNP increased by 35%

Nominal GNP increased by 80%

In the short run an increase in export sales would cause output to ______ and the price level to.

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Rise, rise

Rise,; stay; constant

Fall; rise

fall; stay; constant

Economists use the phrase ceteris paribus to express the assumption.

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All else equal

Everything affects everything else.

Scarcity is a fact of life

There is no such thing as a free lunch

In the expenditure approach to GDP which of the following would be excluded from measurement of GDP.

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Government payments for goods produced by foreign firms

Government payments for goods produced by firms owned by state of local governemnt

Government payments for welfare

All government payments are included in GDP

The fac that the production function relating output to labor becomes flatter as wemove from left to right means that.

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The marginal product of labor is positive

The marginal product of capital is positive

There is diminishing marginal productivity of labor

There is diminishing marginal productivity of capital

Deflation occurs only when

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Some prices fall but average prices still rise

All prices for all goods fall

The average price level falls

The average price level increases bat at a slower rate than before

A temporary adverse productivity shock would.

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Shift the labor supply curve upward

Decrease the level of employment

Decrease future income

Decrease the expected future marginal product of capital

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.

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.

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.

Peaks and trough of the business cycle are known collectively as.

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Volatility

Turning points

Equilibrium point

Real business cycle events

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

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%

Which of the following events would lead to an increase in the marginal product lf labor for every equantity labor.

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An increase in the real wage

A decrease in the real wage

A favorable supply shock such as a fall in the price of oil

an adverse supply shock such as a reduced supply of raw materials.

After a temporary beneficial supply shock hits the economy general equilibrium is restored by

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A shift down and to the left of the IS curve

A shift to the left of the FE line

A shift up and to the left to the LM curve

A shift down and to the right of the LM curve

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