Income tax bond is the example of:

• A) Permanent debt.
• B) Floating debt.
• C) Balanced debt.
• D) Unfunded debt.

Which one of the following is the example of unfunded debt?

• A) Postal life insurance
• B) Income tax bonds
• C) Prize bonds
• D) Treasury bills

The sticky wage model of the aggregate supply says that when the -------- rises more than expected price, the real wage falls so employment ------

• A) Price level; falls.
• B) Expected price level; rises.
• C) Price level; rises.
• D) Expected price level; falls.

Inflation resulting from ------is known as cost push inflation.

• A) Supply shocks
• B) Negative investment shocks
• C) Demand shocks
• D) Positive shocks

Fiscal policy is ---------on output under-------------exchange rate.

• A) More effective; real
• B) Totally ineffective; nominal
• C) Totally ineffective; fixed
• D) More effective; fixed

As risk premium increases, interest rate increase, investment --------- and IS* curve shifts---------

• A) Decrease; leftward.
• B) Decrease; rightward.
• C) Increase; rightward.
• D) Increases; leftward.

In monopolistic competition, firms set their own---------. This is an example of the sticky-price model.

• A) Location
• B) Prices
• C) Revenue
• D) Size

The sticky wage model of the aggregate supply says that when the --------- less than expected price, the real wage raises so employment ------

• A) Expected price level; rises.
• B) Expected price level; falls.
• C) Price level; rises.
• D) Price level; falls.

The inverse relationship between inflation and unemployment is known as ------------

• A) IS curve.
• B) Demand curve.
• C) LM curve.
• D) Philips curve.

All models of ------------predict an upward-sloping SRAS curve.

• A) Mundell-Fleming
• B) Aggregate demand
• C) Aggregate supply
• D) IS-LM

As risk premium increases, interest rate---------, investment --------- and IS* curve shifts leftward.

• A) Increase; Increases
• B) Decreases; decreases
• C) Decreases; increases
• D) Increases; decreases

The role of--------- is very important under --------------rate.

• A) Central bank; floating exchange
• B) Central bank; fixed exchange
• C) Commercial bank; floating exchange
• D) Micro finance bank; fixed exchange

Trade policy is ---------on output under ------------exchange rate.

• A) Totally ineffective; fixed
• B) More effective; fixed
• C) Totally ineffective; nominal
• D) More effective; real

As risk premium increases, interest rate ----------, money demand decreases and LM* curve shifts----------.

• A) Increases; rightward.
• B) Decrease; leftward.
• C) Increase; leftward.
• D) Decrease; rightward.

People base their expectations on all available information, including information about current & prospective future policies is known as:

• A) Expectations.
• B) Rational expectations.
• C) Negative expectations.
• D) Adaptive expectations.

Suppose the price of product “X” increases due to increase in price of raw material. This is the example of ---------

• A) Cost push inflation.
• B) Disinflation.
• C) Hyperinflation.
• D) Demand pull inflation.

With no population growth, the steady-state level of capital per worker will increase whenever the -------------- rate -------------

• A) Saving; increases.
• B) Tax; increases.
• C) Saving; decreases.
• D) Consumption; decreases.

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

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

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

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

Which of the following is an example of LM shock?

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