Deck 1: Economic Concepts and Theories

Question 1

An increase in investment is caused by

A)lower interest rates
B)expectations of lower national income
C)a decrease in the marginal propensity to consume
D)an increase in withdrawals

Answer 1

lower interest rates

Question 2

An increase in aggregate demand is more likely to lead to demand pull inflation

A)if aggregate supply is completely elastic
B)if aggregate supply is completely inelastic
C)if aggregate supply is unitary elastic
D)if aggregate supply is moderately elastic

Answer 2

if aggregate supply is completely inelastic

Question 3

Which of the following is an example of fiscal policy

A)change in interest rate
B)change in tax rate
C)controlling money supply
D)manipulating bank rate

Answer 3

change in tax rate

Question 4

The Cambridge version of the quantity theory of money was developed by:

A)fisher
B)alfred marshall
C)pigou
D)keynes

Question 5

Investment is reckoned by which method for computingGDP:

A)income method
B)productmethod
C)expenditure method
D)value added method

Question 6

Who argued that national income is simply equal to "net product of agriculture"?

A).mercantilists
B)physiocrats
C)classical economists
D)neo classical economists

Question 7

A period of expansion and contraction measured by real GDP is called

A)business cycle
B)expansion
C)recession
D)contraction

Question 8

A tax increase shifts the IS curve to the

A)left, causing output and interest rates to fall.
B)left, causing output and interest rates to increase.
C)right, causing output and interest rates to fall.
D)right, causing output and interest rates to rise.

Question 9

Factors that cause the IS curve to shift include

A)changes in autonomous consumer spending.
B)changes in government spending.
C)changes in investment spending related to a change in the interest rate.
D)only (a) and (b) of the above.

Question 10

In the long-run ISLM model, the long-run effect of a cut in government spending is to

A)increase real output and the interest rate.
B)increase real output and not affect the interest rate.
C)not affect real output and increase the interest rate.
D)not affect real output and reduce the interest rate.

Question 11

In the long-run ISLM model, the long-run effect of a tax cut is to

A)increase real output and the interest rate.
B)increase real output and not affect the interest rate.
C)not affect real output and increase the interest rate.
D)not affect real output and reduce the interest rate.

Question 12

In the long-run ISLM model, the long-run effect of an autonomous increase in investment is to

A)increase real output and the interest rate.
B)increase real output and not affect the interest rate.
C)not affect real output and increase the interest rate.
D)not affect real output and reduce the interest rate.

Question 13

In the long-run ISLM model, the long-run effect of a fall in net exports is to

A)increase real output and the interest rate.
B)increase real output and not affect the interest rate.
C)not affect real output and increase the interest rate.
D)not affect real output and reduce the interest rate.

Question 14

Who invented the General Equilibrium analysis?

A)l. walras.
B)w. leontief
C)j.m.keynes.
D)none of these.

Question 15

Employment equilibrium in the Classical theory is achievedthrough:

A)wage-price flexibility.
B)changes in aggregate demand
C)changes in aggregate supply
D)none of these.

Question 16

Market does not clear is a proposition of:

A)neoclassical theory.
B)keynesian economics
C)monetarism
D)rational expectations

Question 17

The interest rate paid on bonds is known as:

A)call rate
B)coupon rate
C)repo rate
D)bank rate