2. CENTRAL BANK use contractionary monetary policy
Correct : B. to reduce inflation
3. Which one of the following is the objective of fiscal policy?
Correct : D. all of the above
4. Contractionary Fiscal Policy includes:
Correct : C. all of the above
5. under fisher's quantity theory of money,M denoted
Correct : B. the total quantity of legal tender money
6. who is the head of the MONETARY POLICY committee?
Correct : A. RBI, governor
7. The phenomenon of sticky wages usually leads
to unemployment during a recession.
Correct : 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?
Correct : 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?
Correct : A. 0%
10. The quantity theory of money is expressed by the identity equation:
Correct : B. M*V=P*Y
11. In the quantity theory of money, P and Y represent the price and quantity of:
Correct : C. all finished goods and services sold in an economy.
12. Which of the following is not a component of Aggregate Demand?
Correct : A. Saving
13. An example of a government expenditure is
Correct : B. employing a public school teacher.
14. Which of the following items is an investment?
Correct : C. purchase of a new farm tractor.
15. Which factor would shift the Aggregate Demand curve to the right?
Correct : 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
.
Correct : 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:
Correct : B. investment
18. A decrease in the price level shifts the curve to the right, and the aggregate demand curve .
Correct : 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.
Correct : 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?
Correct : D. Increased availability of social capital
21. Which of the following is a major influence on AS?
Correct : A. The quality of the factors available
22. The Phillips curve implied that there was a trade- off available to governments between:
Correct : 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:
Correct : B. Past experience
24. Which of these is NOT a monetary policy tool?
Correct : B. balanced accounts
25. Stagflation results from
Correct : A. a shift of the AS curve to the left.
26. An increase in aggregate demand (given no change in aggregate supply) will cause
inflation.
Correct : B. higher
27. Which of the following would NOT cause a SHIFT in AS?
Correct : C. The level of government spending
28. Which of the following events will shift the Aggregate Supply curve to the left?
Correct : C. real wages rise.
29. The short-run Aggregate Supply curve is upward sloping only because we assume that resource costs are held .
Correct : A. constant
30. If Aggregate Demand exceeds Aggregate Supply, unwanted inventories will begin to accumulate, forcing firms to
prices to get rid of those inventories.