When the interest rate falls, the level of investment will

• A) Remain same
• B) Rise
• C) First fall,then rise
• D) Fall

The investment demand curve shows the relationship between the levels of:

• A) Consumption and interest rate.
• B) Investment and interest rate.
• C) Investment and consumption.
• D) Investment and saving.

The Phillips curve will shift to left if:

• A) Natural rate of unemployment increases.
• B) Optimum inflation changes.
• C) Optimum level of output changes.
• D) Natural rate of unemployment decreases.

Suppose if investment rises by Rs 100 billion at each price level. If the value of the multiplier is 4, what is the amount of change in real GDP demanded at each price level?

• A) 1000
• B) 25
• C) 400
• D) 50

If the values of nominal Gross Domestic Product (GDP) and GDP deflator in 2007 are Rs. 720,000 and 1.25 respectively, the real GDP in this year is:

• A) Rs.840, 000.
• B) Rs.576, 000.
• C) Rs.786, 000.
• D) Rs.900, 000.

Sum of total factor income is called:

• A) National Income.
• B) Disposable income.
• C) Personal income.
• D) Government revenues.

Gross National Product equals:

• A) Gross Domestic Product minus net factor incomes from abroad.
• B) Gross Domestic Product plus expected inflation.
• C) Gross Domestic Product plus net factor incomes from abroad.
• D) Gross Domestic Product minus expected inflation.

What measures the rate of increase of average wage in the economy?

• A) Wage inflation
• B) Producer Inflation Index
• C) Consumer Inflation Index
• D) Wage deflation

A reason why some economists basically ignore the short run is because they believe that the economy:

• A) Can only be graphed with a horizontal curve.
• B) Can only be graphed with a vertical curve.
• C) Has self-correcting mechanisms.
• D) Never needs correction.

Keeping in view the model of aggregate supply and aggregate demand, in the long run, a decrease in the money supply should cause:

• A) Prices to fall and output to remain unchanged.
• B) Prices to rise and output to remain unchanged.
• C) Both prices and output to fall.
• D) Both prices and output to rise.

According to classicals, unemployment is

• A) Seasonal
• B) Voluntary
• C) Structural
• D) Involuntary

Contentious movement of production, income and resources between producers and consumers is known as:

• A) Inflation
• B) Circular flow
• C) Investment
• D) Consumption

The price level in long run is determined by:

• A) Money supply.
• B) The government.
• C) Aggregate demand.
• D) Aggregate supply.

An exchange rate that varies according to the supply and demand for the currency in the foreign exchange market is called a(n) _________ exchange rate.

• A) Undervalued
• B) Flexible
• C) Fixed
• D) Overvalued

Counting a product more than once in National income measurement is known as:

• A) Mathematical bias.
• B) Statistical error.
• C) Counting error.
• D) Double counting.

In the Keynesian cross model, the 45-degree line has a slope of:

• A) Infinity.
• B) 45.
• C) 0.
• D) 1.

Agents erroneously spend more than they should, because:

• A) Government driven actual inflation in period t as expected in period t-1
• B) Government is not driven actual inflation in period t as expected in period t-1
• C) Government driven actual inflation in period t-1 as expected in period t
• D) None of the given options is true

The traditional Phillips Curve shows the inverse relationship between the:

• A) Short run and the long run.
• B) Nominal wage and the real wage.
• C) Unemployment and output.
• D) Rate of inflation and the unemployment rate.

Which of the following is the formula to calculate unemployment rate?

• A) None of the given options.
• B) Number of unemployed persons + labour force.
• C) Number of employed persons / labour force x 100.
• D) (Number of unemployed persons / labour force) x 100.

Which of the following is NOT an example of leakage into the circular flow of income?

• A) imports
• B) Exports
• C) Taxes
• D) Saving