Question 1

IS-LM model was developed by:

Accepted Answer

A)  Keynes
B)  Walras
C)  J.R.Hicks
D)  Don-PatinkinE) B) and D)
F) A) and C) C

Question 2

Wages and prices do not adjust quickly to restore general equilibrium is a property of

Accepted Answer

A)  Classical economics
B)  Keynesian economics
C)  Monetary economics
D)  Supply side economicsE) All of the above
F) A) and B)

Question 3

LM curve shows the equilibrium condition in ---------- market

Accepted Answer

A)  Goods market
B)  Product market
C)  Money market
D)  None of theseE) None of the above
F) All of the above

Question 4

An Economic model is a statement of relationship among economic ------

Accepted Answer

A)  Variables
B)  Phenomena
C)  Development
D)  None of theseE) A) and B)
F) B) and C)

Question 5

Frictional unemployment exists:

Accepted Answer

A)  When there is a decrease in real GDP
B)  Because it takes time to find a job when one is first entering the labour force
C)  As a result of technological change
D)  When an individual retiresE) All of the above
F) A) and C)

Question 6

ISLM model was developed by:

Accepted Answer

A)  Hicks
B)  Keynes
C)  Friedman
D)  None of theseE) A) and B)
F) None of the above

Question 7

The quantity theory of money was restated by:

Accepted Answer

A)  Alfred Marshall
B)  Milton Friedman
C)  Irving Fisher
D)  J.M. .KeynesE) B) and C)
F) None of the above B

Question 8

The law which states that supply creates its own demand and overproduction is impossible is known as:

Accepted Answer

A)  The law of supply
B)  Say's law of market
C)  Law of demand
D)  Law of macro economicsE) A) and D)
F) A) and B)

Question 9

In classical theory which of the following is found in the economy:

Accepted Answer

A)  Unemployment
B)  Involuntary unemployment
C)  Less than full employment
D)  Full employmentE) A) and B)
F) All of the above

Question 10

The IS curve has a ------slope

Accepted Answer

A)  Positive
B)  Negative
C)  Zero
D)  None of theseE) A) and C)
F) A) and B)

Question 11

The natural rate of unemployment equals the sum of those who are:

Accepted Answer

A)  Frictionally and structurally unemployed
B)  Frictionally and cyclically unemployed
C)  Structurally and cyclically unemployed
D)  Frictionally structurally and cyclically unemployedE) A) and B)
F) All of the above A

Question 12

Pigou's version of Cambridge equation is:

Accepted Answer

A)  M = KP/Y
B)  P= KR/M
C)  MV = PT
D)  MV = MI VIE) All of the above
F) A) and B)

Question 13

The marginal productivity of labour:

Accepted Answer

A)  Increases when the price of the good sold increases, ceteris paribus
B)  Decreases when there is an adverse supply shock, ceteris paribus
C)  Increase when more workers are hired, ceteris paribus
D)  Decreases when there is an increase in the quantity of capital, ceteris paribusE) A) and C)
F) B) and D)

Question 14

In MV=PT, if M doubles and V and T remain constant, then P will:

Accepted Answer

A)  Double
B)  1/2
C)  1
D)  4E) B) and C)
F) All of the above

Question 15

When saving is greater than investment in a two-sector model,

Accepted Answer

A)  Output should increase
B)  Output should decrease
C)  Output should not change
D)  None of theseE) B) and C)
F) C) and D)

Question 16

When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:

Accepted Answer

A)  Leftward
B)  Rightward
C)  No shift
D)  NoneE) C) and D)
F) B) and D)

Question 17

The equilibrium in the product market is represented by which curve?

Accepted Answer

A)  IS
B)  LM
C)  Demand
D)  Supply curveE) A) and D)
F) B) and D)

Question 18

Which policy is effective in the Classical range?

Accepted Answer

A)  Monetary policy
B)  Fiscal policy
C)  Incomes policy
D)  None of theseE) A) and D)
F) C) and D)

Question 19

Which policy is effective in the intermediate range?

Accepted Answer

A)  Monetary policy
B)  Fiscal policy
C)  Both policies
D)  None of theseE) C) and D)
F) B) and D)

Question 20

The LM curve has a ----- slope

Accepted Answer

A)  Positive
B)  Negative
C)  Zero
D)  None of theseE) A) and C)
F) A) and D)

Exam 5: Macroeconomic Theory and Models

IS-LM model was developed by:

Correct AnswerverifiedC

Wages and prices do not adjust quickly to restore general equilibrium is a property of

Correct AnswerverifiedShow Answer

LM curve shows the equilibrium condition in ---------- market

Correct AnswerverifiedShow Answer

An Economic model is a statement of relationship among economic ------

Correct AnswerverifiedShow Answer

Frictional unemployment exists:

Correct AnswerverifiedShow Answer

ISLM model was developed by:

Correct AnswerverifiedShow Answer

The quantity theory of money was restated by:

Correct AnswerverifiedB

The law which states that supply creates its own demand and overproduction is impossible is known as:

Correct AnswerverifiedShow Answer

In classical theory which of the following is found in the economy:

Correct AnswerverifiedShow Answer

The IS curve has a ------slope

Correct AnswerverifiedShow Answer

The natural rate of unemployment equals the sum of those who are:

Correct AnswerverifiedA

Pigou's version of Cambridge equation is:

Correct AnswerverifiedShow Answer

The marginal productivity of labour:

Correct AnswerverifiedShow Answer

In MV=PT, if M doubles and V and T remain constant, then P will:

Correct AnswerverifiedShow Answer

When saving is greater than investment in a two-sector model,

Correct AnswerverifiedShow Answer

When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:

Correct AnswerverifiedShow Answer

The equilibrium in the product market is represented by which curve?

Correct AnswerverifiedShow Answer

Which policy is effective in the Classical range?

Correct AnswerverifiedShow Answer

Which policy is effective in the intermediate range?

Correct AnswerverifiedShow Answer

The LM curve has a ----- slope

Correct AnswerverifiedShow Answer

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C

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B

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A

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