2. New Classical Economics based on Adaptive Expectation
Which one of the following is correct among the following options?
Correct : A. 1 alone is correct
3. According to Keynes, there is
Correct : A. no direct relationship between the quantity of money and price level
4. Relationship between changes in the interest rates and bond prices
Codes :
Correct : B. i and iv are correct.
5. The concepts of inside money and outside money is given by
Correct : C. gurley and shaw
6. Assertion (A): Long-run Philips curve is a vertical line at the NAIRU
Reason (R): Non-accelerating inflation raise of unemployment, more or less, stands accepted
Correct : C. both (a) and (r) are true, and (r) is the explanation.
7. The quantity theory of money first propounded in 1588 by an Italian Economist
Correct : B. davanzatti
8. What is the shape of Long Run Phillips curve is
Correct : D. vertical
9. Which among the followings is not the feature of monetarism?
Correct : D. demand- deficient unemployment big causes
10. According to Keynes Investment is a function of
Correct : D. interest
11. “Interest is poorly a monetary phenomenon “is a very famous statement made by
Correct : A. j m keynes
12. Which one the following economists is the chief advocate of supply side economics
Correct : A. arther laffer
13. Advocates of New classical Economics are
Correct : D. all of the above
14. The Laffer curve is associated with
Correct : B. supply side economics
15. The doctrine of Policy ineffectiveness postulate is associated with
Correct : A. new classical economics
16. The concept of Rational expectation is associated with
Correct : B. new classical hypothesis
17. The idea of Adaptive expectation is associated with
Correct : A. natural unemployment rate hypothesis
18. The idea of rational expectation first given by
Correct : A. john muth
19. Laffer curve links
Correct : B. tax revenue and tax rate
20. New classical Economics is consistent with
Correct : A. policy ineffectiveness postulate
21. New Classical Economics is based on
Correct : A. rational expectation
22. Supply side Economics was emerged against the background of
Correct : C. 1970’s stagflation
23. The dual decision hypothesis was given by
Correct : A. clower
24. The book Elements of Pure Economics was authored by
Correct : A. walras
25. The Neo Keynesian quantity constrained model is associated with the work of
Correct : B. robert m clower
26. The efficiency wage model is associated with
Correct : A. new keynesian economics
27. The insider outsider model is associated with
Correct : A. new keynesian economics
28. The Menu cost model is associated with
Correct : B. new keynesian economics
29. The New Classical economics was developed against the back ground of
Correct : B. 1970’ stagflation
30. Reagonomics is related to
Correct : A. supply side economics’
31. Ratex hypothesis is related to
Correct : A. new classical economics
32. Inflation can be contained by
Correct : D. all these three measures
33. Gregory Mankiw belongs to
Correct : A. new keynesian economics
34. According to Hawtrey, the business cycle is caused by
Correct : D. all the above
35. Which of the following are main postulates of Supply side Economics
Correct : A. cut in tax rate
36. Which of the following economist is not related to New Classical Economics
Correct : A. artherlaffer
37. According to New Classical Economist, Business cycle is due to
Correct : B. unanticipated policy change
38. The shape of Laffer curve is
Correct : A. inverted u shape
39. The curve which explains relationship between tax rate and tax revenue is called
Correct : A. laffer curve
40. According to New classical Economics
Correct : C. both a and b
41. According to New Classical Economics Philips curve is
Correct : A. always vertical
42. Liquidity trap is a situation when,
Correct : A. all potential investors expect the rate of interest to rise in future
43. The classical economists focussed on the role of money as
Correct : A. medium of exchange
44. According to Milton Friedman Theory of permanent component of consumption-expenditure
depends on i. Transitory income alone ii. Transitory and permanent income iii. Permanent income alone iv. Windfall gains Codes :
Correct : D. only iii is correct
45. The classical model of economic development emphasises
Correct : C. both (a) and (b)
46. Assertion (A): According to Keynes, individuals hold either cash or all bonds.
Reasoning (R): Because, according to him, the speculative demand for money is associated with uncertainty. Codes:
Correct : C. (a) is correct, but (r) is incorrect.
47. Speculative demand for money is zero when market rate of interest is
Correct : A. more than the ‘critical rate’.
48. Assertion (A) : There exits inverse relationship between interest rates and bond prices. Reason (R) : A bond price represents the present discounted value of the payments agreed upon
at the time when the bond was issued. Codes :
Correct : A. both (a) and (r) are correct, and (r) is the correct explanation of (a).
49. According to Says law of market what is the main cause of overproduction?
Correct : A. unemployment
50. In Classical system how to correct an overproduction or glut in the market?
Correct : B. by wage cut policy
51. According to Classical what bring full employment in an economy?
Correct : C. wage price flexibility
52. What is the effect of monetary policy in a situation of “Liquidity trap”?
Correct : D. monetary policy ineffective
53. In which of the following market Keynes effect operates?
Correct : C. money market
54. In which of the following market Pigou effect operates?
Correct : A. goods market
55. Real balance effect is equal to –
Correct : C. pigou effect + keynes effect
56. Under perfect competition firm hire labour until-
Correct : C. money wage rate = general price level
57. Classical dichotomy is based on –
Correct : A. neutrality of money
58. Cambridge K is related to –
Correct : B. cash balance approach
59. Assertion (A) : In liquidity trap, the demand for money is perfectly interest elastic. Reason (R) : Because in this situation, all the investors expect the market rate of interest to rise
towards the natural rate of interest. Codes :
Correct : A. (a) & (r) both are correct and (r) is the correct explanation of (a)
60. Which of the following is not specifically mentioned as a determinant of the demand formoney ?
Correct : D. real rate of interest
61. In the Keynesian system speculative demand for money arises because of, 1 : uncertainty of future interest rate. 2 : unexpected expenditures. 3 : To bridge the gap between income and eventual expenditures.
4 : Relationship between changes in the interest rates and bond price. Codes :
Correct : B. 1 & 4 are correct
62. The classical economists focused on the role of money as,
Correct : A. medium of exchange
63. Identify the correct chronological order of the following classical economists.
Correct : B. adam smith, ricardo, malthus, mill
64. Liquidity trap is a situation when,
Correct : A. all potential investors expect the rate of interest to rise in future.
65. Which of the following statements does not hold true in case of the Keynesian economics?
Correct : D. as schedule is vertical, and output, and employment are completely supply determined.
66. In whose economic theories, Malthus theories are in the base?
Correct : C. keynes
67. The equation of exchange is
Correct : D. m*v=p*t
68. The formula to compute the spending multiplier is
Correct : B. 1/(1-mpc)
69. Liquidity trap sets a loop:
Correct : B. above which discount rate cannot rise
70. If the Keynesian consumption function is C=10+0.8Yd then, if disposable income is 1000,
what is amount of total consumption ?
Correct : C. 810
71. Why does a temporary decrease in government purchases decrease labour supply in the
classical model?
Correct : C. the decrease in current or future taxes needed to pay for the decrease in government purchases increases people wealth
72. As the economy nears full employment the aggregate supply curve tend to
Correct : B. become sleeper
73. “In a closed economy with no government; s=100+0.2y investment increases by 100, what is
the increase in consumption?
Correct : D. 400
74. Using Keynesian multiplier, MPC= 0.8 and government spending increased by 40 billion
dollars. How much will GDP increased?
Correct : B. 200 billion dollars
75. According to Keynesian analysis, the great depression was caused by:
Correct : A. a lack of spending
76. The purpose of Keynesian analysis is to explain what to determines the
Correct : D. levels of national income, output and employment
77. In the Keynesian range of the SRAS, if AD shift to the right, then
Correct : D. the price level is unchanged
78. In the very short term, in the Keynesian model which of the following is fixed and does not
change when GDP changes
Correct : A. planned investment
79. The slope of the consumption function is (Keynesian)
Correct : A. less than the slope of the 45 degree line, but not equal to zero
80. A decrease in expected future income, ______ consumption expenditure and ______ saving.
Correct : C. decreases: increases
81. If the aggregate supply curve is perfectly elastic as in the Keynesian model at low level of
national incomes, as increase in AD will cause an increase in
Correct : B. the level of real national output
82. Attempts to force inflation below no-accelerating inflation rate of unemployment (NAIRU)
will cause:
Correct : A. inflation accelerate without any change in employment or output
83. Which of the following is true with respect to the monetary approach to the balance of
payments?
Correct : A. it views the balance of payments as an essentially monetary phenomenon
84. According to monetarists, money supply constitutes
Correct : B. currency +demand deposits+time deposits
85. According to monetary approach a revaluation of a nation’s currency
Correct : C. reduces the nation’s demand for money
86. what is the foundation of monetarism?
Correct : A. quantity theory of money
87. The economist who proposed that,” inflation is always and every where monetary
phenomenon”was
Correct : C. milton friedman
88. Suppose that the money stock is $10 billion, each dollar generates $ 5worth of spending, and
the NAIRU is 7%. According to the quantity theory of what is nominal GDP (income)
Correct : D. $ 50 million
89. When there are vacancies in the job-market, but also high levels of unemployment, then we
could say that this unemployment is?
Correct : D. structural
90. Demand-side unemployment is partly caused by:
Correct : D. a lack of aggregate demand
91. According to the basic classical model, an increase in the money supply will cause
Correct : B. the price level to increase.
92. Why does a temporary decrease in government purchases decrease labour supply in the
classical model?
Correct : B. the decrease in current or future taxes needed to pay for the decrease in government purchases increases people\s wealth.