Question # 1

The practice of using fiscal and monetary policy to stabilize the economy is known as.

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Fine turning of deamand

Monetarism

Laissez faire economics

Supply side economics

Keynes and Say's macroeconomic theory of employment were diametrically opposed Say state that.

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Supply creates demand

Demand creates supply

Unemployment is a most likely state of affairs

Full employment can only be achieved by government interference.

Suppose your company is in equilibrium will its capital stock at its desired level A permanent increase in the depreciation rate now has what effect on your desired capital stock. i

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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 beacause the user cost of capital is now higher

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

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

A nation experiences internal balance if it acieves.

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Full employment

Price stability

Full employment and price stability

Unemployment and price instability

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 in a graph with interest rates and income on the vertical and horizontal axes, does not shift the balance of payments curve to the right.

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Capital flow restrictions

Export quotas

Export subsidies

Import tariffs

The substitution effect of a decrease in real interest rates is to cause a consumer to.

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Increase future consumption and decrease current consumption

Decrease future consumption and increase current consumption

Increase current consumption and increase saving

Decrease current consumption and increase saving.

When a British pound equals Rs. 1.60 and the French France equals Rs. 0.40 the ability to earn infinite profit if it were not the case, implies that the exchange rate would be.

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1 franc = 4 pounds

1 franc = 1 pound

5 franc = 1 pound

None of the above

In the long run a reduction in labor supply would cause output to _______ and the aggregate price level to.

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fall; rise

fall ; fall

rise ; fall

rise; rise

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

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

An increase in the expected real interest rate tends to.

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Raise desired saving only

Raise desired investment only

Raise both desired savings and desired investment

Raise desired savings, but lower desired investment.

The key difference between classical and Keynesian macro economist is their differing beliefs about.

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The slope of the aggregate demand curve

The speed at which prices adjust

The natural rate of unemployment

The full employment level of output

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

The normal interest rate minus the inflation rate is the

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Depreciation rate

Discount rate

Real interest rate

Forward rate

If the reserve deposit ratio is 0.25 and the ratio of currency in circulation to deposits is 0.3, the potential money multiplier will have a value of.

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2.36

0.42

1.20

0.96

An IOU of the Federal Reserve Bank of Scan Francisco to Bank of America is called.

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Discourse

Federal funds

Reserves

Collateral

Ahmed regression model yields a Durbin Watson d statistic whose value is 0.002. The results indicate.

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Positive serial correlation

the presence of multicollinearity

No serial correlation

Negative serial correlation

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