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.

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