Quantity theory of money MV=PQ, shows the positive relationship among:

• A) Overall prices to quantity of money
• B) Nominal value of expenditures to demand of money
• C) Demand of money and supply of money
• D) None of the given options is true

Suppose marginal propensity to consume is 0.8 and government expenditures increase by Rs.1000. The multiplier is equal to:

• A) 1000/(1+0.8)
• B) 1/(1+0.8)
• C) 1/(1-0.8)
• D) 1000/(1-0.8)

If Aggregate expenditures are more than aggregate production then their will be:

• A) Inflationary gap in economy.
• B) Deflationary gap in economy.
• C) Dynamic gap in economy.
• D) Output gap in economy.

Unemployment benefits may increase the unemployment rate because unemployment benefits:

• A) Reduce the cost of job search.
• B) Reduce the benefits of additional job searching.
• C) Enable people to quit searching for work.
• D) Encourage people to quit their jobs.

Which of the following is leakage into circular flow of income?

• A) Government spending
• B) Exports
• C) Investment
• D) Saving

In the complete classical model, a rightward shift of the labor supply curve will:

• A) Decrease the nominal wage and increase the price leve.
• B) Increase both the price level and the nominal wage.
• C) Decrease the price level and increase the nominal wage.
• D) Decrease both the price level and the nominal wage.

Suppose level of investment in the economy is Rs.500, 000 and the change in output equals Rs.80, 000. The value of accelerator is:

• A) 1.72.
• B) 6.25.
• C) 0.16.
• D) 0.85.

The relationship between consumer spending and income is known as the:

• A) Investment function.
• B) Consumption function.
• C) 45-degree line.
• D) Consumer price index.

When too much money, chases too few goods, the resulting inflation is called

• A) Demand Pull Inflation
• B) Stagflation
• C) Deflation
• D) Cost Push Inflation

"Index-linking" is very common in

• A) Latin America
• B) Australia
• C) USA
• D) South Asia

Market price include:

• A) Factor price + Direct taxes
• B) Factor price + Indirect taxes
• C) Factor price - Direct taxes
• D) Factor price - Indirect taxes

Consider a closed economy where total savings equals Rs. 80000, investment is Rs. 90000 and total government spendings is Rs. 55000. What are injections into the circular flow of income?

• A) Rs.225, 000
• B) Rs.145, 000
• C) Rs.170, 000
• D) Rs.135, 000

Unemployment benefits reduce the cost of job search, this may:

• A) Leads to higher inflation.
• B) Increase the output in country.
• C) Decrease the unemployment rate.
• D) Increase the unemployment rate.

The total market value of all final goods and services produced within a given period by factors of production located within a country is:

• A) Gross national product.
• B) Net national income.
• C) Gross domestic product.
• D) Net national product.

Final goods are:

• A) Perishable goods only.
• B) For further processing.
• C) Inferior goods only.
• D) For Direct use by the consumers.

Which type of inflation is linked with the supply side of the economy?

• A) Demand pull inflation
• B) Consumerism
• C) Chronic inflation
• D) Cost push inflation

In measurement of GDP, the problem of double counting is avoided by:

• A) Adjusting the value of intermediate goods with prices.
• B) Calculating value added at each stage of production.
• C) Adjusting the value of only finished goods with prices.
• D) Using GDP deflator.

If leakages into the circular flow of income rise, then the value of multiplier will:

• A) Fall.
• B) Remain unchanged.
• C) Rise.
• D) Become zero.

The primary reason of decline in the value of money is:

• A) Inflation.
• B) A rise in consumption.
• C) Higher tax rate.
• D) Deflation.

According to the Real Business Cycles (RBC) School, fluctuations in output occur because of:

• A) Change in price level.
• B) Change in aggregate demand.
• C) Change in technology.
• D) Unanticipated change in demand management policies.