| 1. |
An economy is at equilibrium output when |
| A. | Y = C + I + G + NX |
| B. | Y = AD + C + G + NX |
| C. | Y = AD + C + I + G + NX |
| D. | Y = AD + C + I + G |
| Answer» C. Y = AD + C + I + G + NX | |
| 2. |
CENTRAL BANK use contractionary monetary policy |
| A. | to increase govt expenditure |
| B. | to reduce inflation |
| C. | all of the above |
| D. | none of the above |
| Answer» B. to reduce inflation | |
| 3. |
Which one of the following is the objective of fiscal policy? |
| A. | achieve full employment. |
| B. | stabilize the price level. |
| C. | maintain equilibrium in the Balance of Payments. |
| D. | all of the above |
| Answer» D. all of the above | |
| 4. |
Contractionary Fiscal Policy includes: |
| A. | slow economic growth |
| B. | stamp out inflation |
| C. | all of the above |
| D. | none of the above |
| Answer» C. all of the above | |
| 5. |
under fisher's quantity theory of money,M denoted |
| A. | medium |
| B. | the total quantity of legal tender money |
| C. | measurement tool |
| D. | money |
| Answer» B. the total quantity of legal tender money | |
| 6. |
who is the head of the MONETARY POLICY committee? |
| A. | RBI, governor |
| B. | RBI, deputy governor |
| C. | Prime Minister |
| D. | President |
| Answer» A. RBI, governor | |
| 7. |
The phenomenon of sticky wages usually leads to unemployment during a recession. |
| A. | higher |
| B. | lower |
| C. | stabalize |
| D. | none of the above |
| Answer» A. higher | |
| 8. |
If inflation is 6% and you receive a 1% raise in your nominal wage, by how much did your real wage change? |
| A. | -5% |
| B. | 1% |
| C. | -6% |
| D. | 6% |
| Answer» A. -5% | |
| 9. |
If inflation is 1% and you receive a 1% raise in your nominal wage, by how much did your real wage change? |
| A. | 0% |
| B. | 1% |
| C. | 2% |
| D. | 3% |
| Answer» A. 0% | |
| 10. |
The quantity theory of money is expressed by the identity equation: |
| A. | M*Y=P+Y |
| B. | M*V=P*Y |
| C. | M+V=P |
| D. | none of the above |
| Answer» B. M*V=P*Y | |
| 11. |
In the quantity theory of money, P and Y represent the price and quantity of: |
| A. | all finished goods and services in an economy. |
| B. | all finished goods sold in an economy. |
| C. | all finished goods and services sold in an economy. |
| D. | none of the above |
| Answer» C. all finished goods and services sold in an economy. | |
| 12. |
Which of the following is not a component of Aggregate Demand? |
| A. | Saving |
| B. | Investment |
| C. | Consumption |
| D. | Net Exports |
| Answer» A. Saving | |
| 13. |
An example of a government expenditure is |
| A. | a social security payment to an elderly person. |
| B. | employing a public school teacher. |
| C. | an unemployment insurance check. |
| D. | All of the above |
| Answer» B. employing a public school teacher. | |
| 14. |
Which of the following items is an investment? |
| A. | purchase of a mutual fund. |
| B. | purchase of a U.S. government bond. |
| C. | purchase of a new farm tractor. |
| D. | purchase of a stock. |
| Answer» C. purchase of a new farm tractor. | |
| 15. |
Which factor would shift the Aggregate Demand curve to the right? |
| A. | a fall in interest rates which increases investment |
| B. | an increase in real incomes due to a rise in GDP. |
| C. | an increase in real wages. |
| D. | an appreciation of the dollar. |
| Answer» A. a fall in interest rates which increases investment | |
| 16. |
In the IS–LM model, the impact of an increase in government purchases in the goods market has ramifications in the money market, because the increase in income causes a(n) in money . |
| A. | increase; supply |
| B. | increase; demand |
| C. | decrease; demand |
| D. | decrease; supply |
| Answer» B. increase; demand | |
| 17. |
In the IS–LM model under the usual conditions in a closed economy, an increase in government spending increases the interest rate and crowds out: |
| A. | prices |
| B. | investment |
| C. | the money supply |
| D. | taxes |
| Answer» B. investment | |
| 18. |
A decrease in the price level shifts the curve to the right, and the aggregate demand curve . |
| A. | IS; shifts to the right |
| B. | IS; does not shift |
| C. | LM: shifts to the right |
| D. | LM; does not shift |
| Answer» D. LM; does not shift | |
| 19. |
If the short-run IS–LM equilibrium occurs at a level of income below the natural level of output, then in the long run the price level will , shifting the curve to the right and returning output to the natural level. |
| A. | increase; IS |
| B. | decrease; IS |
| C. | increase; LM |
| D. | decrease; LM |
| Answer» D. decrease; LM | |
| 20. |
When using AD/AS analysis to illustrate changes within an economy, which of the following would NOT need to be considered when looking at changes to economic growth? |
| A. | Increased labour productivity |
| B. | More efficient use of the capital stock |
| C. | Developing a more efficient capital and finance sector |
| D. | Increased availability of social capital |
| Answer» D. Increased availability of social capital | |
| 21. |
Which of the following is a major influence on AS? |
| A. | The quality of the factors available |
| B. | Consumption |
| C. | Government spending |
| D. | The advice of government |
| Answer» A. The quality of the factors available | |
| 22. |
The Phillips curve implied that there was a trade- off available to governments between: |
| A. | The price level and unemployment |
| B. | The price level and employment |
| C. | Out put and employment |
| D. | Inflation and unemploymen t |
| Answer» D. Inflation and unemploymen t | |
| 23. |
A belief that expectations were exogenous could lead one to the view that judgements about the future were likely to be based on: |
| A. | The best available information |
| B. | Past experience |
| C. | all of the above |
| D. | none of the above |
| Answer» B. Past experience | |
| 24. |
Which of these is NOT a monetary policy tool? |
| A. | open market operations |
| B. | balanced accounts |
| C. | reserve requirements |
| D. | discount rates |
| Answer» B. balanced accounts | |
| 25. |
Stagflation results from |
| A. | a shift of the AS curve to the left. |
| B. | a shift of the AS curve to the right. |
| C. | a shift of the AD curve to the left. |
| D. | a shift of the AD curve to the right. |
| Answer» A. a shift of the AS curve to the left. | |
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