If marginal propensity to consume (MPC) is 0.9, the government purchases multiplier is----------

• A) 2
• B) 1.11
• C) 5
• D) 10

Macro-economic disequilibrium exists when aggregate supply is -------

• A) not equal to aggregate demand.
• B) equal to aggregate demand.
• C) equal to aggregate investment.
• D) not equal to aggregate investment.

The aggregate demand curve shows the relationship between the price level and the:

• A) Quantity of output supplied.
• B) Income.
• C) Quantity of output demanded.
• D) Investment.

An expansionary monetary policy shifts ------------to the---------

• A) IS curve; left.
• B) IS curve; right.
• C) LM curve; right.
• D) LM curve; left.

In the Solow growth model with technological growth, k = K/ (L×E) shows---------------per effective worker.

• A) Labor
• B) Capital
• C) Output & labor
• D) Output

In the IS-LM model, --------------in government purchases can shift ---------curve to the left.

• A) A decrease; IS
• B) A decrease; LM
• C) An increase; IS
• D) An increase; LM

Suppose the economy of China with population growth but no technological change.Which of the following will generate a higher steady state growth rate of total output?

• A) Higher birth rate.
• B) Higher inflation rate.
• C) Higher hoarding rate.
• D) Higher saving rate.

In the ------------model,capital exhibits diminishing returns. In a basic --------------- model, capital exhibits constant returns.

• A) Solow growth; Population growth
• B) Population growth; Endogenous growth
• C) Solow growth; endogenous growth
• D) Endogenous growth; Solow growth

Which of the following is a true statement?

• A) Expansionary monetary policy shifts IS curve.
• B) A negative IS shocks shifts IS curve to the left.
• C) Expansionary monetary policy increases interest rate.
• D) A negative IS shocks shifts AD curve to the right.

The LM curve is -----------

• A) Horizontal.
• B) Vertical.
• C) Positively sloped.
• D) Negatively sloped.

According to aggregate demand (AD) & aggregate supply (AS) analysis; the favorable supply shock will -------output---------inflation and increase employment.

• A) Increase; Decrease
• B) Increase; Increase
• C) Decrease; Decrease
• D) Decrease; Increase

In Solow model; production functions shows labor augmenting technological progress. Y is equal to:

• A) F (K+1, L + K)
• B) F (K, L x E)
• C) F (K+1, L+1 + E+1)
• D) F (K, L + E)

Output per worker is------------

• A) Y = y/L
• B) y = L/Y
• C) Y = Y/L
• D) y = Y/L

Economic growth occurs when there is a(n)----------------rate.

• A) Decrease in birth
• B) Increase in the death
• C) Increase in tax
• D) Increase in the economy's productive

IS curve is --------------

• A) Horizontal.
• B) Positively sloped.
• C) Vertical.
• D) Negatively sloped.

In the short run equilibrium, if output is ------------------level, then prices will fall.

• A) At the full employment
• B) Below the full employment
• C) Above the unemployment
• D) Above the natural rate of unemployment

The important determinant of the steady state ratio of capital to labor is--------

• A) Foreign aid.
• B) Output.
• C) Saving rate.
• D) Labor force.

In the Solow model with technological progress, the steady state growth rate of capital per effective worker is -----------

• A) n - g.
• B) n + g.
• C) One.
• D) Zero.

Development is impossible without domestic--------

• A) Unemployment.
• B) Debt.
• C) Inflation.
• D) Savings.

IS* curve shows the negative relationship between nominal exchange rate and ----------

• A) Price level.
• B) Output level.
• C) Real exchange rate.
• D) Interest rate.