After some economic shock, government involvement is essential to easing restrictions and bringing the economy back to a desirable level, is the perspective of;

• A) Classical.
• B) Monetarist.
• C) Real business cycle theorist.
• D) Keynesian.

In the long run, the aggregate supply curve is:

• A) Upward sloping.
• B) Horizontal.
• C) Downward sloping.
• D) Vertical.

The Misperception Theory may be summed up with an equation showing how real production reacts to actual and;

• A) Expected unemployment.
• B) Expected price levels.
• C) General price level.
• D) Nominal interest rate.

The formula for real money demand function is:

• A) L(r + πe ).
• B) L(Y, πe ).
• C) L(Y, r ).
• D) L(Y, r + πe ).

The Money Demand Function (MD) expresses the factors influencing people's desire to hold onto their;

• A) Liabilities
• B) Assets
• C) Money
• D) Consumption.

The interest rate on non-monetary assets has a negative relationship with hoarding cash rather than investing since higher rates deter people from;

• A) Wasting cash.
• B) Storing cash.
• C) Asset saving.
• D) Consumption.

According to Quantity Theory of Money, real money demand is proportional to:

• A) Real income.
• B) Real interest rate.
• C) Real inflation.
• D) Nominal income.

People's expectations are influenced when they predict a rise in inflation with an increase in;

• A) Real money supply.
• B) Real money demand.
• C) Nominal money supply
• D) Nominal money demand.

The Solow Growth Model assumes productivity growth as:

• A) Endogenous variable.
• B) Control variable.
• C) Dependent variable.
• D) Exogenous variable.

An increase in money supply results in a proportional rise in;

• A) Unemployment.
• B) GDP Growth.
• C) Money demand.
• D) Prices.

The fundamental objective of endogenous growth theory is to comprehend the variables that affect:

• A) Labor growth.
• B) Capital growth.
• C) Technology growth.
• D) Economic growth.

In the long run, an increase in aggregate demand will primarily affect:

• A) Investment.
• B) Output.
• C) Employment.
• D) The price level.

The variations, which are shown as peaks and troughs, show the expansion and contraction stages of economic activity is known as;

• A) General equilibrium.
• B) Business cycle.
• C) Poverty cycle.
• D) Business activity.

A concept related to money demand, which at times is used in discussions of monetary policy, is:

• A) Money supply.
• B) Income.
• C) Interest rate.
• D) Money velocity.

Central Bank play in response to increased demand for money in the classical model increases the money supply to,

• A) Prevent inflation.
• B) Prevent deflation.
• C) Maintain stability.
• D) Demand for money.

When government spending increases the IS curve:

• A) Shifts down.
• B) Becomes steeper.
• C) Becomes flatter.
• D) Shifts up.

In the context of the extended classical model, expected increases in the money supply cause an instantaneous change in the short-run aggregate supply as well as the aggregate demand in a way that;

• A) Preserve equilibrium.
• B) Create unemployment.
• C) Lead to a recession.
• D) Cause Inflation.

Risk is the level of uncertainty around the return on:

• A) Liability.
• B) Loan.
• C) Assets.
• D) Investment.

How does an increase in government expenditures financed by higher taxes affect the economy?

• A) Decreases labor supply due to the income effect.
• B) Increases labor supply due to the substitution effect.
• C) Decreases labor supply due to the substitution effect.
• D) Increases labor supply due to the income effect.

How does the short-run supply curve differ from the long-run supply curve in the AD-AS model?

• A) Vertical vs. horizontal.
• B) Upward sloping vs. vertical.
• C) Horizontal vs. vertical.
• D) Perfectly elastic vs. inelastic.