Investment causes the capital stock to------------ while depreciation causes capital stock to ----------------

• A) Rise; fall.
• B) Rise; rise.
• C) Fall; rise.
• D) Fall; fall.

Nominal exchange rate is denoted by---------------

• A) P*.
• B) E.
• C) e.
• D) r*.

If labor productivity per week is 10 units and there are 5 employees what is the total output?

• A) 50
• B) 5
• C) 2
• D) 10

A graph of all combinations of income (Y) and interest rate (r) that results in goods market equilibrium is called:

• A) IS curve
• B) LM curve
• C) Money supply curve
• D) Money demand curve

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

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

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

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

Which one of the following is correct formula of government purchases multiplier?

• A) 1/ (1-MPS)
• B) (1-MPS) / (1-MPC)
• C) 1/ (1-MPC)
• D) -MPC / (1-MPC)

The major difficulty for underdeveloped country to measure the economic growth is:

• A) Preoccupation with other more important problems.
• B) Lack of skilled manpower.
• C) Lack of supply of empirical data.
• D) All of the given options.

Under Mundell Fleming model a small open economy with a floating exchange rate, monetary expansion does all of the following EXCEPT:

• A) Cause net exports to rise.
• B) Increase the equilibrium income level.
• C) Decrease the exchange rate.
• D) Increase the exchange rate.

The shape of short run aggregate supply curve (SRAS) is ---------------

• A) Convex to the origin.
• B) Vertical.
• C) Horizontal.
• D) Concave to the origin.

Which of the following is an example of fiscal policy that will increase aggregate demand?

• A) A cut in government expenditure.
• B) A tax cut.
• C) A cut in discount rate.
• D) An increase in discount rate.

As the marginal propensity to consume (MPC) increases the government purchases multiplier will-----------

• A) Increase.
• B) Decrease.
• C) Remain constant.
• D) Approach to zero.

Which of the following is a correct statement?

• A) LM* curve is horizontal.
• B) LM* curve is vertical.
• C) LM* curve is negatively sloped.
• D) LM* curve is positively sloped.

In the IS-LM model, --------------in government purchases shifts ---------curve to the right.

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

In economics a -------- is an ----------event that affects an economy either positively or negatively.

• A) Debt; unexpected
• B) Debt; expected
• C) Shock; unexpected
• D) Shock; expected

In the endogenous growth model, the assumption of ----------------return to capital is more plausible.

• A) increasing
• B) constant
• C) decreasing
• D) zero

Change in capital stock is equal to investment minus-------------

• A) Stock.
• B) National investment.
• C) Saving.
• D) Depreciation.

The two important factors of production are--------------

• A) Labor and electricity.
• B) Land and goods.
• C) Machine and investment.
• D) Labor and capital.

According to the prediction of Solow model, countries with higher population growth rates will have:

• A) Lower levels of capital and income per worker in the long run.
• B) Higher levels of capital and birth rate in the short run.
• C) Higher levels of capital and income per worker in the long run.
• D) Lower levels of investment and income in the short run.

If the production function Y = F(K, L) has -------then---------

• A) Constant returns to scale; F(zK, zL) = zY.
• B) Constant returns to scale; F(Y/L, zL) = zY.
• C) Increasing returns to scale; F(zK, zL) = zY.
• D) Decreasing returns to scale; F(zK, zL) = y.