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

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

In the Solow growth model with technological growth,Y/L =y * E shows----------per worker.

• A) Technology
• B) Labor
• C) Output
• D) Capital

Due to a positive demand shock, aggregate demand curve will:

• A) Shift towards right.
• B) Become vertical.
• C) Remain the same.
• D) Shift towards left.

Due to decrease in money supply, aggregate demand curve will:

• A) Shift towards right.
• B) Shift towards left
• C) Remain the same.
• D) Become vertical.

In Solow growth model,the slope of production function f(k*) is:

• A) Investment (I*).
• B) Capital (K*).
• C) Labor (L*).
• D) Marginal product of capital (MPK).

An increase in the ---------shifts the aggregate demand (AD) curve to the ---------.

• A) Money supply; right
• B) Tax rate; right
• C) Price level; right
• D) Money supply; left

Which of the following is NOT the policy to increase the saving rate?

• A) Replace federal income tax with a consumption tax.
• B) Increase incentives for private saving.
• C) Reduce the government budget deficit.
• D) Decrease incentives for private saving.

The steady state value of "k" that --------------is called golden rule of capital stock and is denoted by "k*".

• A) Minimize consumption
• B) Maximizes consumption
• C) Maximizes depreciation
• D) Maximize saving

Which of the following is an example of LM shock?

• A) More ATM machine
• B) Business expectations
• C) Stock market boom
• D) Consumer confidence

Which of the following is an example of adverse supply shock?

• A) Good weather
• B) Decrease in price of capital
• C) Flood
• D) Decrease in price of labor

Investment causes the capital stock to rise while ------------ causes capital stock to fall.

• A) Deflation
• B) Inflation
• C) Discount rate
• D) Depreciation

In the IS-LM model, an increase in money supply shifts ---------

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

Which one of the following is correct?

• A) Change in capital stock = Investment – Saving
• B) Change in capital stock = (Investment – Depreciation) *100
• C) Change in capital stock = Investment – Depreciation
• D) Change in capital stock = Investment + Depreciation

John Maynard Keynes presented a simple theory in which the interest rate is determined by:

• A) Money supply and money demand.
• B) Money demand and rate of interest.
• C) Real balances and aggregate demand.
• D) Money supply and rate of interest.

Suppose labor force (L) = 1000 in year one and population is growing at 1% per year then what will be the labor force in year two?

• A) 10
• B) 1010
• C) 100
• D) 1110

The trade-off between inflation and unemployment is called------------curve.

• A) Keynes
• B) Phillips
• C) Classical
• D) Fisher

Permanent debt is a type of --------- term loans.

• A) Easy
• B) Long
• C) Very short
• D) Short

As the price level ----------the value of --------

• A) Decrease; ATM card increases
• B) Increases; coins increases.
• C) Decrease; currency decreases
• D) Increases; money falls.

The deviation of the -------------from the natural rate is known as cyclical unemployment.

• A) Rate of labor force
• B) Actual rate of unemployment
• C) Working rate
• D) Population

Country risk premium is ---------related with the ------------

• A) Negatively; consumption.
• B) Positively; investment.
• C) Negatively; investment.
• D) Negatively; government purchases.