Question

If people are made unemployed because of a fall in aggregate demand this is known as:

Select one:

a. Structural unemployment

b. Frictional unemployment

c. Cyclical unemployment

d. Natural Rate of unemployment

e. Seasonal unemployment

Which of the following describes a part of the transmission mechanism?

Select one:

a. the central bank undertakes open market sales and the resulting interest rate increase encourages people to save more

b. a change in real money balances causes a portfolio disequilibrium and asset holders' reactions influence interest rates

c. an income tax rate cut stimulates private spending but the resulting interest rate increase dampens the income expansion

d. the central bank undertakes open market purchases and the resulting interest rate increase encourages people to save more

e. an increase in government spending is partially offset by the crowding out of private investment

In the IS-LM model, the interest rate serves as a link between

Select one:

a. household saving and business investment

b. domestic markets and foreign markets

c. the goods market and the assets market

d. actions of the central bank and changes in consumer spending

e. government spending and consumer spending

If the CB undertakes open market sales, then

  

Select one:

a. the LM-curve will shift to the left

b. the IS-curve will shift to the right

c. the LM-curve will shift to the right

d. bond prices will increase

e. interest rates will decrease and income will increase

The rate of wage inflation is 10%, the unemployment gap is 25, the responsiveness of wages to unemployment is 0,4. If we consider the augmented Phillips curve, what is the expected inflation?

Select one:

a. 15%

b. 25%

c. 10%

d. 20%

e. 16%

In an IS-LM model, any point that is to the left and below the IS-curve indicates a situation where

Select one:

a. there is excess demand for goods and services in the expenditure sector

b. there is excess supply of goods and services in the expenditure sector

c. the expenditure sector is in equilibrium but the money sector is not

d. there is excess demand for money in the money sector

e. there is excess supply of money in the money sector

The determinants of duration and frequency of unemployment are the basic determinants of ………..

Select one:

a. the cyclical unemployment

b. the frictional unemployment

c. the seasonal unemployment

d. the structural unemployment

e. the natural rate of unemployment

If the central bank increases money supply, then real money balances will rise and

Select one:

a. asset prices will fall

b. the LM–curve will shift to the left

c. so will the interest rate

d. the interest rate will fall

e. the IS-curve will shift to the right

The size of the money multiplier

Select one:

a. declines with a decrease in high-powered money

b. declines as the currency-deposit ratio decreases

c. increases as the reserve-deposit ratio decreases

d. increases as the reserve requirement is increased

e. cannot be influenced by actions of the Fed

A real depreciation of the domestic currency will

Select one:

a. improve the trade balance and increase aggregate demand

b. lower the trade balance and increase aggregate demand

c. lower the trade balance and aggregate demand

d. improve the trade balance and lower aggregate demand

e. improve the trade balance but not affect aggregate demand

The LM-curve

Select one:

a. shows the relationship between the interest rate and the level of investment spending

b. shows combinations of the interest rate and the income level such that money supply and money demand are equal

c. is negatively sloped because increases in the income level can only be achieved if the interest rate is lowered

d. is upward sloping because a higher income level is always associated with a higher nominal money supply

e. is negatively sloped since increases in money supply always lower interest rates

A change in which of the following will NOT shift the IS-curve?

Select one:

a. autonomous net exports

b. autonomous saving

c. autonomous money demand

d. autonomous investment

e. autonomous consumption

Assume adult males have a 40% share of the work force and their unemployment rate is 8%, adult females have a share of 50% and their unemployment rate is 7%, and teenagers have a share of 10% and their unemployment rate is 5%. What is the overall unemployment rate?

Select one:

a. 5.2%

b. 2.0%

c. 6.0%

d. 7.2%

e. 4.9%

A country's balance-of-payments surplus is equal to

Select one:

a. the decrease in the country's official exchange reserves

b. net capital outflow minus the current account deficit

c. exports minus imports

d. imports minus exports

e. the current account surplus plus private net capital inflow

Assume that the currency-deposit ratio is 32%, the required reserve ratio is 7%, the excess reserve ratio is 1%, and total money supply is $1,320 billion. What is the amount of high-powered money?

Select one:

a. $165 billion

b. $330 billion

c. $132 billion

d. $400 billion

e. $800 billion

Assume that bank deposits are $4000 billion, the required reserve ratio is 10%, currency outstanding is $600 billion, and excess reserve is zero. What is the money multiplier?

Select one:

a. 1

b. 2

c. 10

d. 4.6

e. 5.6

Suppose an increase in oil prices is accompanied by a decline in the level of potential output. Which of the following is the most likely long-run effect?

Select one:

a. real GDP will remain the same but prices will increase

b. real GDP will decrease but prices will increase

c. the unemployment rate and prices will both decrease

d. real GDP will remain the same but nominal GDP will decrease

e. real GDP and prices will both decline

Assume we know that the income velocity of M2 has remained constant, while M2 has increased by 6% and prices have increased by 4%. We can conclude that

Select one:

a. nominal GDP has grown by 10%

b. real GDP has decreased by 1.5%

c. nominal GDP has decreased by 2%

d. real GDP has grown by 2%

e. real GDP has grown by 1.5%

Suppose an increase in oil prices is accompanied by a decline in the level of potential output. Which of the following is the most likely long-run effect?

Select one:

a. real GDP will remain the same but prices will increase

b. real GDP will decrease but prices will increase

c. the unemployment rate and prices will both decrease

d. real GDP will remain the same but nominal GDP will decrease

e. real GDP and prices will both decline

Assume we know that the income velocity of M2 has remained constant, while M2 has increased by 6% and prices have increased by 4%. We can conclude that

Select one:

a. nominal GDP has grown by 10%

b. real GDP has decreased by 1.5%

c. nominal GDP has decreased by 2%

d. real GDP has grown by 2%

e. real GDP has grown by 1.5%

The inflation-expectations-augmented Phillips curve implies that

Select one:

a. unemployment is at its natural rate when expected inflation is equal to actual inflation

b. the inflation rate is equal to the real output growth rate plus the monetary growth rate

c. the expected inflation rate is always equal to the monetary growth rate

d. stagflation occurs when expected inflation is below actual inflation

e. stagflation occurs when the short-run Phillips curve shifts left

Which of the following is the equation for the LM-curve?

Select one:

a. L = kY – hi

b. i = (k/h)Y + (1/h)(M/P)

c. i = (1/b)A_o - (b/a)Y

d. L= kY + hi

e. i = (1/h)[kY – (M/P)]

Answer 1

Ans 1) (C) Cyclical unemployment - When people lost their jobs because of fall in aggregate demand it is called Cyclical unemployment.In this form of unemployment, there is low demand for goods in the economy, so as demand decreases, production requirement also falls and only some people are required to work so others lose their jobs.This cause Cyclical unemployment.

A) No, structural unemployment is not due to fall in demand. It happens if market is not capable to provide work to every person who is willing to work.There is difference between the skills required for the jobs and skills attained by the workers willing to work.

B)No, frictional unemployment is not due to fall in demand.It is a type of unemployment which occurs when the person change the job in search of new or better job.It is due to the time gap in search of new job from one place to other.

D)No, natural rate of unemployment is not due to fall in aggregate demand.It represents the unemployment rate in the economy which could be due to political,economic or social factors.It is a mixture of surplus, structural and frictional unemployment.

E) No, seasonal unemployment is not due to fall in aggregate demand. It is due to fall in demand for workers in some specific season or during some period of time in a year.It causes changes in employment of workers due to changes in the season.