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The derivation of the aggregate supply curve under classical model assumes

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I do not want to answer this Question Perfect wage- price flexibility in the labour market Sticky wages in both the directions Sticky wages on the upside only Sticky wages on the downside only Stickiness of both wages and prices Correct Answer: 1 Your Answer: 0 Points Awarded: 0

Consider Episco, a country which is growing at 7%. The potential growth rate of Episco is 6.5%. Recently, it is observed that prices are rising at 10% per annum which is much above the medium term inflation target of 6% for Episco economy. Episcos economy can be said to be characterized by

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I do not want to answer this Question Overheating Soft landing Hard landing Stagflation Reflation Correct Answer: 1 Your Answer: 0 Points Awarded: 0

Which one of the following is a problem associated with the self correcting mechanism of markets when the

economy is undergoing recession

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I do not want to answer this Question The time it will take to self correct It will lead to overheating of the economy It will lead to higher trade deficit The recession will prompt producers to look of markets outside the domestic economy which will reduce efficiency in the economy None of the above Correct Answer: 1 Your Answer: 0 Points Awarded: 0

Consider Maniaco, a country which is growing at 3%. The potential growth rate of Episco is 3%. The medium term inflation target of 2% for Maniaco whereas the current inflation rate is 2%. What kind of fiscal pricy would you prescribe for Maniaco

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I do not want to answer this Question Reduce tax rates Increase tax rates Reduce interest rates Increase interest rates Do nothing Correct Answer: 2 Your Answer: 0 Points Awarded: 0

Expansionary Fiscal policy will be ineffective in influencing output when the economy is operating in the

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I do not want to answer this Question Classical range of the supply curve Classical range of the aggregate demand curve Keynesian range of aggregate supply curve Keynesian range of aggregate demand curve Intermediate range of the aggregate demand curve Correct Answer: 1 Your Answer: 0 Points Awarded: 0

The neo keyensian approach to explain economic fluctuation bring out the importance of

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I do not want to answer this Question Friction in the market Possibility of policy ineffectiveness Laissez fair economy Self correcting mechanism Passive policy Correct Answer: 1 Your Answer: 0 Points Awarded: 0

Policy making is difficult because

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I do not want to answer this Question The direction of impact is possibly clear but not quantum The quantum of impact is clear but not direction Both direction and quantum of impact can be accurate Policy is like taking a chance which might work None of the above Correct Answer: 1 Your Answer: 0 Points Awarded: 0

Central banks sometimes use contractionary monetary policy when the economy is experiencing high growth but relatively low inflation. This could be possibly because:

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I do not want to answer this Question Central banks dislike the idea of high growth Central banks like to take growth to further higher levels Central banks sense the building up of an Asset price bubble The central bank fear that the economy is overheating The central banks have an accurate idea about the potential growth rate of the economy Correct Answer: 3 Your Answer: 0 Points Awarded: 0

Suppose Okun's law holds and a one percentage point increase in the unemployment rate reduces real output by 2% of full-employment output. The expectations-augmented Phillips curve is given by = e - 2.5 (u - 0.04). Suppose = 0.08 and e = 0.03. What is the natural rate of

unemployment? 0 1 2 3 4 5 I do not want to answer this Question 0.02 0.04 2 4 0.03 Correct Answer: 2 Your Answer: 0 Points Awarded: 0 10 You are given the following information about the economy. The natural rate of unemployment is 0.04, Okun's Law is that ( - Y)/ = 2(u - ), and the Phillips curve relationship is = e - 2 (u - 0.04). What was the full-employment level of output in 2002? Refer Table - 1 0 1 2 3 4 5 I do not want to answer this Question 1968 2200 2120 1908 2000

Correct Answer: 3 Your Answer: 0 Points Awarded: 0 11

Please Refer to Figure-1 Suppose the economy depicted in the figure is in equilibrium at a price level of 104 and an output equal to 8,000. Suppose the Federal Reserve increases the money supply. In the long-run, what is the unemployment rate?

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I do not want to answer this Question 3 percent 5 percent 7 per cent not enough information to answer the question Correct Answer: 2 Your Answer: 0 Points Awarded: 0

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The theory according to which people optimally use all the information they have including information about government policies, when forecasting the future is called

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I do not want to answer this Question rational expectations. the Phillips curve. the theory of aggregate demand & aggregate supply. the Volcker disinflation.

Correct Answer: 1 Your Answer: 0 Points Awarded: 0 13 In the expectations-augmented Phillips curve, = e - 3(u - ). If = 0.06 when e = 0.06 and u = 0.04, then = 0 1 2 3 4 I do not want to answer this Question 0.02. 0.03 0.04 0.05 Correct Answer: 3 Your Answer: 0 Points Awarded: 0 14
Suppose most people had anticipated that inflation would be 3% in the coming year because the Fed would increase the money supply by 3%. Instead, the Fed increases the money supply by 5%. In the short run, this would cause actual output to be full-employment output and prices to increase by 3%.

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I do not want to answer this Question above; more than above; less than below; more than below; less than Correct Answer: 1 Your Answer: 0 Points Awarded: 0

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A beneficial supply shock would cause

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I do not want to answer this Question a movement up the short-run Phillips curve. a movement down the short-run Phillips curve. the short-run Phillips curve to shift upward and to the right. the short-run Phillips curve to shift downward and to the left. Correct Answer: 4 Your Answer: 0 Points Awarded: 0

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The argument that when policy changes, people's behavior changes so that historical relationships between macroeconomic variables will no longer hold is known as

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I do not want to answer this Question the Philips curve the policy irrelevance hypothesis. hysteresis. the Lucas critique. Correct Answer: 4 Your Answer: 0 Points Awarded: 0

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Please Refer to Figure-2 In the short run, the price level is 104 and output is 8,000. Suppose the Organization of Petroleum Exporting Countries (OPEC) doubles the price of a barrel of oil which causes the quantity of output supplied to change by 1,000 units at every price level. What is the new equilibrium unemployment rate?

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I do not want to answer this Question 4 per cent 5 per cent 6 per cent 8 per cent Correct Answer: 4 Your Answer: 0 Points Awarded: 0

18

Please Refer to Figure-2 In the short run, the price level is 104 and output is 8,000. Suppose the Organization of Petroleum Exporting Countries (OPEC) doubles the price of a barrel of oil which causes the quantity of output supplied to change by 1,000 units at every price level. What is the equilibrium inflation rate?

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I do not want to answer this Question 4 per cent 5 per cent 6 per cent 8 per cent Correct Answer: 3 Your Answer: 0 Points Awarded: 0

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Please Refer to Figure-2 In the short run, the price level is 104 and output is 8,000. Suppose the Organization of Petroleum Exporting Countries (OPEC) doubles the price of a barrel of oil which causes the quantity of output supplied to change by 1,000 units at every price level. What is the misery index at the new equilibrium?

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I do not want to answer this Question 14 9 6 4 Correct Answer: 1 Your Answer: 0 Points Awarded: 0

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Please Refer to Figure-2 In the short run, suppose the price level is 106 and output is 7,600. Suppose a new technology lowers the operating costs of all businesses in the economy which causes the quantity of output supplied to change by 1,000 units at every price level. What is the new equilibrium unemployment rate?

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I do not want to answer this Question 8 per cent 6 per cent

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5 per cent 4 per cent Correct Answer: 3 Your Answer: 0 Points Awarded: 0