Deck 6: Macroeconomic Equilibrium and Concepts

Question 1

When investment is negatively related to the rate of interest, equilibrium output in the goods market:

A)Is unrelated to the rate of interest
B)Is inversely related to the rate of interest
C)Is positively related to the rate of interest
D)Falls as the rate of interest decreases

Answer 1

Is inversely related to the rate of interest

Question 2

Simultaneous equilibrium in the money (LM) and goods (IS) market exists:

A)At an unlimited number of output levels and rates of interest
B)At only one output level and rate of interest
C)At an unlimited number of output levels and only one rate of interest
D)At only one output level and an unlimited number of rates of interest

Answer 2

At only one output level and rate of interest

Question 3

In which of the following situations will an increase in the money supply have no effect upon output?

A)LM is steeply sloped and IS is steeply sloped
B)LM is vertical and IS is steeply sloped
C)LM is steeply sloped and IS is vertical
D)LM is relatively flat as is IS

Answer 3

LM is steeply sloped and IS is vertical

Question 4

Policy Neutrality is the main proposition of:

A)Supply Side Economics.
B)Keynesian Economics
C)Monetarism
D)Rational expectations hypothesis

Question 5

Who invented the General Equilibrium analysis?

A)L. Walras.
B)W. Leontief
C)J.M.Keynes.
D)None of these.

Question 6

Employment equilibrium in the Classical theory is achieved through:

A)Wage-Price flexibility.
B)Changes in aggregate demand
C)Changes in aggregate supply
D)None of these.

Question 7

Market does not clear is a proposition of:

A)Neoclassical theory.
B)Keynesian Economics
C)Monetarism
D)Rational expectations

Question 8

The interest rate paid on bonds is known as:

A)Call rate
B)Coupon rate
C)Repo rate
D)Bank rate

Question 9

The monetary policy is completely ineffective when the LM curve is:

A)Vertical .
B)Horizontal.
C)Upward sloping.
D)Downward sloping

Question 10

Changes in the subjective or objective factors

A)Never affect consumption function
B)Always cause downward shift in consumption function
C)Always cause upward shift in consumption function
D)They cause upward or downward shifts in consumption function

Question 11

In a closed economy, the value of multiplier , when MPC is 0.90

A)25
B)90
C)10
D)9

Question 12

Income is a ------- variable

A)Flow
B)Discontinuous
C)Stock
D)None of the above

Question 13

Ratio of consumption expenditure to any particular level of income

A)MPS
B)APS
C)APC
D)MPC

Question 14

When MPS = 0.2, MPC will be

A)0.8
B)0.2
C)1.2
D)20

Question 15

According to Keynes, rising aggregate income is always associated with

A)Higher saving rate
B)Higher import
C)Lower export
D)Low production