Question

21. Which form of economic model attempts to capture a macroeconomic outcome by using only one or just a handful of explanatory variables? (a) a fashion model; (b) a reduced-form model; (c) a naïve model; (d) multi-equation structural model that corrects for the homoskedasticity of its error terms.

22. A body of economic theory concedes that, in equilibrium, an economy does NOT necessarily reach full employment. This body of theory is most commonly associated with: (a) Jerome Powell; (c) John McCain; (d) John Maynard Keynes,

23. Over the long run, simply increasing the money supply, all else remaining the same, can best be expected to: (a) increase inflation without increasing real GDP; (b) decrease real GDP and decrease inflation; (c) shift the long-run aggregate supply curve to the left; (d) have no impacts at all on the long-run nominal GDP growth rate.

24. Keynes’s conjecture refers principally to which of the following? (a) the relationship between money supply growth and inflation; (b) the notion that the marginal propensity to consume lies between 0% and 100%; (c) that monetary policy is always the best way to influence the cyclical condition of the economy at the margin; (d) that only males over the age of 75 years old can serve as POTUS regardless of whether they have periodic losses of memory.

Answer 1

21) :- a reduced form model

Reduced Form Models

Reduced form models do not impose assumptions on the company's balance sheet, instead they impose assumptions on the output of a structural model. Reduced form models also allow the analyst flexibility to incorporate real world conditions in the model.

The input estimates for reduced form models can be estimated using historical data, which are called hazard rate estimation.

22) :-(d) John Maynard Keynes,

John Maynard Keynes

The economist John Keynes argued that the government should step in and spend more to bring the economy back up to its full productive capacity

23) :-A is right option

increase inflation without increasing real GDP

inflation is defined as an increase in the price of goods & services that is representative of the economy as a whole.

• The upward movement in the average level of prices

24) :- B is right option

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