eco403 collection of old papers

Which of the following is neither a determinant of the slope of the IS curve nor a determinant of the slope of the LM curve?

Question No. 1 Marks : 02

Total Marks: 60 Total Questions: 10

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For each MCQ question, read the choices available and select the choice which you consider is the correct answer, by clicking on the appropriate check box.

You should try to complete MCQ's in 10 - 15 minutes in order to give yourself 135 - 140 minutes for descriptive questions.

Each MCQ carries 2 Marks each and Descriptive Questions carry 10 Marks each.

This exam consists of 5 Multiple Choice Questions (MCQ's) and 5 descriptive questions.

All questions are compulsory. INSTRUCTIONS:

Time Allowed: 150 Minutes

Final Term Examination – Spring 2005

ECO403 Macroeconomics

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A bank has excess liquidity reserves to lend but is unable to find a willing borrower. This will __________ the size of the money multiplier.


Why M2 is sometimes a more stable measures of money than M1.expalin your own words using the definition of M1 and M2.


of products produced by a given industry. oo of labor supplied by all households.

o produced by the government. o of goods and services produced in an economy.

Aggregate supply is the total amount:


o money multiplier.

oo current ratio.

bank's line of credit. o reserve ratio.

The increase in base money divided by the corresponding induced increase in commercial bank deposits is the:


How do we know that calculating GDP by the expenditure approach yields the same answer as calculating GDP by the income approach?


Why is frictional unemployment not necessarily harmful?


oo the sensitivity of income to investment

the sensitivity of money demand to income o the sensitivity of money demand to interest rates

o the sensitivity of interest rates to investment

What are the major functions of the Federal Reserve? Do you think that any of these functions could be performed by private banks, or is the central bank the only agent capable of filling these roles? Explain.


Whenever inflation occurs, which segment of the society is badly affected?


joint equilibrium in the goods and money markets oo all of the other options

o the equivalence of monetary and fiscal policy o the equilibrium of the demand and supply sides of the economy

The intersection of the IS and LM curves captures: Question No. 8 Marks : 02

oo double

Increase o have no effect on

o Reduce

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3. Equal to income 4. Unrelated to income

2. Less then income 1. More than income

T

he consumption of individuals in the aggregate tends to vary:

Q

uestion No. 5 Marks : 1

T

he _____________________is an accumulation of all past annual deficits

Q


3. No relati4. Vertical

2. Negative onship

1. Positive

Question No. 3 The relationship between MPL and labor unit is:

Marks : 3

W

hat four policies could be adopted to encourage the technological progress?

Q


1. T 2. F

A simultaneous Rs.10 million increase in both taxes and govt. spending will have no net effect on aggregate demand.

Q


Time Allowed: 150 Minutes Final Term Examination – Spring 2006

ECO403

Q

1. T lips curv

Q

3. Is difficult to measure and can be defined legiti2. Is well defined but frequently distorted by creative but improper accoun1. Is well defined and straightforward to measure.

T Q

c

A doctrine that states that goods must s

Q W Q

1. T

Q

3. Aggregate supply exceeds aggregate demand2. Aggregate demand exceeds potential output 1. Aggregate demand exceeds aggregate supply

A


recessionary gap exists when:

4. Potential output exceeds aggregate demand.


At any given value of exchange rate ‘e’, a tariff or quota will not affect net exports.

2. F


hy the CPI may over estate inflation?


ell at the same currency-adjusted price in all countries is alled_________________________.


he budget deficit or surplus:

ting practices. mately in several ways.

4. Is so arbitrarily defined that it is meaningless.


Phi e shows the relationship between population and inflation rate.

2. F


Investment is the most volatile components of:

Q

Q

Q

3. When wages rise, people will tend to work more. activities.

1. People with higher incomes will spend some of it on leisure by working less. A higher w

o

A change in the wage rate has a substitution and an income effec

Q _ Q

3. Production and expenditure are in2. when one person increases expenditure every1. Production and expenditure are interdependent.

Q

changes in economic activity. Discretio

2. Invisible hand mechanisms to automatically bring the economy out of a recession. Government revenue and expen

cancelled out by losses, which make expected long-run returns equal to zero. Inherent stock market mechanisms that automatically cause stock market gain

A Q

4. Disposable income


utomatic stabilizers refer to:

1. s to be

3. diture items that change automatically in response to

4. nary monetary policy maneuvers designed to keep inflation automatically under control.


The multiplier effect exists because:

one increases expenditure dependent

4. Production causes expenditures.


_________________is the stock of assets that can be readily used to make transactions.


t associated with it. Which f the following statements is associated with the income effect?

2. age rate makes work more attractive relative to leisure and other non market

4. As wages rise, the opportunity cost of leisure declines.


Favorable __________________lower costs and prices.


3. Personal income 2. GNP 1. GDP

Q

1. True

Q

fl

_________

sti th

How would a

Q

3. With both monetary and fi2. Monetary policy 1. Fiscal policy

P Q

3. Reduce aggregate demand by reducing investment 2. Raise aggregate demand by increasing consumption1. Raise aggregate demand increasing investment

In Q to

How fiscal and monetary policy can affe

Q 43. Constant steady state 2. A lower steady state 1. A higher steady state

he Solow growth model shows that lower investment leads to

. None of the given options.


ct macro economic variables, use the IS-LM model analyze the effects of these policies.


the short run an increase in saving might:

4. Reduce aggregate demand by reducing consumption


olicymakers can affect macroeconomic variables with

scal policy 4. Non of the given options


tax cut and budget deficit affect the economy and the economic well-being of e country?

Que on No. 23 Marks : 1

______________is the average rate of unemployment around which the economy uctuates.


The value of final goods and services measured at current prices is called nominal GDP.

2. False


T

bcapital stock? (5)

For each unit of capital a firm earns real revenue R/P and bears real cost (PK/P)(r +δ).Firm

Q

3. MPL < W/p 2. MPL > W/P 1. MPL = W/P

E Q F Q

3. In between2. One 1. Zero nes conjectured that the marg

Q

3. Employment level 2. Money supply 1. Expected inflat

T Q H Q

1. True According to the modern theory of inflation prices are flexible and market clear.

2. False


ow will you define business cycles?


he Philips curve states that inflation rate depends on:

ion

4. All of the given options


Key inal propensity to consume is:

zero and one 4. Negative


rom where the demand for loanable funds comes, and on which thing it depends?


ach firm hires labor up to the level where:

4. None of the given options

uestion No. 31 Marks :1

needs your help in making decision whether to increase or decrease

)Explain why investment depends on the real interest rate?(5)

2. Nominal GD3. Stock market level

1. Rate of inflation P

Marks : 1

GDP deflator is a measure of the economy’s:

4. Real GDP

Question No. 32

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FINALTERM EXAMINATION

SPRING 2007

ECO403 - MACROECONOMICS (Session - 4 )

Marks: 60

Time: 150min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Wednesday, July 04, 2007

INSTRUCTIONS: Please read the following instructions carefully before attempting any question:

• All questions are compulsory.

• This exam consists of 15 Multiple Choice Questions (MCQ’s) carrying 1 mark

each,5 fill in the blanks carrying 1 mark each,5 true false carrying 1 mark each, 3

Short questions carrying 5 marks each and 2 Descriptive questions carrying 10

marks.

• You are required to show all the working of short questions as well as Descriptive

question.

• This examination is closed book, closed notes, closed neighbors.

• Do not ask any question about the contents of this examination from anyone.

• You may wish to pace yourself with your own watch, but the Supervisor will be the

official timekeeper of the test.

• Failure to comply with the Supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant

event.

• Use of mobile phone is strictly prohibited. It must be "switched off" if it is in your

custody.

For Teacher's use only Question 1 2 3 4 5 6 7 8 9 10 Total

Marks Question 11 12 13 14 15 16 17 18 19 20

Marks Question 21 22 23 24 25 26 27 28 29 30

Marks Question No: 1 ( Marks: 1 ) - Please choose one Scarcity can best be defined as a situation in which: ►

There are no buyers willing to purchase what sellers have produced.

►

There is more than enough money to satisfy consumers' wants.

►

Resources are limited in quantity and can be used in different ways.

►

There are not enough goods to satisfy all of the buyers' demand.

Question No: 2 ( Marks: 1 ) - Please choose one In the circular flow diagram, firms _____________ inputs and households ____________ products. ►

Supply; Demand

►

Demand; supply

►

Supply; supply

►

Demand ; demand

Question No: 3 ( Marks: 1 ) - Please choose one Gross domestic product measured in terms of the prices of a fixed, or base, year is:

►

Base GDP.

►

Current GDP.

►

Real GDP.

►

Nominal GDP.

Question No: 4 ( Marks: 1 ) - Please choose one The number of people unemployed equals: ►

The number of people employed minus the labor force.

►

The labor force plus the number of people employed.

►

The number of people employed divided by the labor force.

►

The labor force minus the number of people employed.

Question No: 5 ( Marks: 1 ) - Please choose one Keeping in mind the functions of money, which one of the following is not money? ►

Currency

►

Checks

►

Credit cards

►

Time deposits

Question No: 6 ( Marks: 1 ) - Please choose one Which of the following would not be included in M2? ►

Demand deposits

►

Checking accounts

►

Money market accounts

►

None of the given options

Question No: 7 ( Marks: 1 ) - Please choose one The relationship between consumer spending and income is known as the: ►

45-degree line.

►

Consumption function.

►

Investment function.

►

Consumer price index.

Question No: 8 ( Marks: 1 ) - Please choose one All of the following statements about the marginal product of capital MPK are true EXCEPT: ►

MPK = f(k + 1) - f(k).

►

MPK tends to decline as k increases.

►

When there is only a little capital, MPK is very small.

►

MPK is equal to the slope of the production function y = f(k).

Question No: 9 ( Marks: 1 ) - Please choose one A rightward shift in the aggregate demand curve can be caused by: ►

An increase in government spending.

► An increase in money supply.

►

A decrease in taxes.

►

All of the given options.

Question No: 10 ( Marks: 1 ) - Please choose one The aggregate supply curve in the short run is different from the aggregate supply curve in the long run due to: ►

The recurring nature of supply shocks.

►

The existence of sticky prices in the short run.

►

The wealth effect.

►

The crowding out effect.

Question No: 11 ( Marks: 1 ) - Please choose one Fiscal policy shifts the: ►

The short run aggregate supply curve.

►

The long run aggregate supply curve.

►

Full employment level of output.

►

The aggregate demand curve.

Question No: 12 ( Marks: 1 ) - Please choose one If wages are sticky downward, an increase in labor: ►

Demand increases the wage rate.

►

Demand decreases the wage rate.

►

Supply increases the wage rate.

►

None of the given options.

Question No: 13 ( Marks: 1 ) - Please choose one Which of the following would a macroeconomist consider as investment? ►

Julie buys a government bond.

►

Fred purchases 100 shares of stock in Microsoft.

►

Tom buys a new tractor for his farm.

►

Jane buys a new car.

Question No: 14 ( Marks: 1 ) - Please choose one The nominal interest rate is: ►

Unadjusted for the effects of inflation.

►

The interest rate quoted in financial markets.

►

Both unadjusted for the effects of inflation and the interest rate quoted in financial markets.

►

None of the given options.

Question No: 15 ( Marks: 1 ) - Please choose one If interest rates increase, people will most likely hold: ►

More bonds and less cash.

►

Less bonds and less cash.

►

More bonds and more cash.

►

Less bonds and more cash.

Question No: 16 ( Marks: 1 ) - Please choose one Intermediate goods are counted in the calculation of GDP. ►

True

►

False

Question No: 17 ( Marks: 1 ) - Please choose one Structural unemployment is the unemployment resulting from real wage rigidity and job rationing. ►

True

►

False

Question No: 18 ( Marks: 1 ) - Please choose one As income rises, average propensity to consume (APC) falls. ►

True

►

False

Question No: 19 ( Marks: 1 ) - Please choose one Adaptive expectation is an approach that assumes that people base their expectations on all available information, including information about current and prospective future policies. ►

True

►

False

Question No: 20 ( Marks: 1 ) - Please choose one The deposits that banks have received but have not lent out are called banks investments. ►

True

►

False

Question No: 21 ( Marks: 1 ) To compute the total value of different goods and services, the national income accounts use _____________________. Question No: 22 ( Marks: 1 ) Monetary policy is conducted by country’s __________________. Question No: 23 ( Marks: 1 ) ___________________ is a graph of all combinations of interest rate and income that results in goods market equilibrium. Question No: 24 ( Marks: 1 ) Full-employment output does not depend on the price level, so the long run aggregate supply (LRAS) curve is ______________. Question No: 25 ( Marks: 1 ) Economists decompose the impact of an increase in the real interest rate on consumption into two effects: an income effect and a _________________. Question No: 26 ( Marks: 5 ) Define hyperinflation. What causes hyperinflation? Also explain briefly why government creates hyperinflation. Question No: 27 ( Marks: 5 ) What are the advantages of floating exchange rates and fixed exchange rates? Question No: 28 ( Marks: 5 ) Define budget deficit and government debt. Also write down the major components of government debt. Question No: 29 ( Marks: 10 )

Discuss the policies to promote economic growth. Question No: 30 ( Marks: 10 ) Explain Milton Friedman’s permanent income hypothesis.

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SPRING 2007

ECO403 - MACROECONOMICS (Session - 4 )

Marks: 40

Time: 90min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Monday, May 14, 2007

Please read the following instructions carefully before attempting any question:

All questions are compulsory.

This exam consists of 10 Multiple Choice Questions (MCQs) of 1 mark each, 5 fill in the

blanks of 1 mark each, 3 Short questions of 5 marks each and one Descriptive

question of 10 marks.

For each Multiple Choice Question, read the options available and select which you

consider is the correct one.

You are required to show all the working of short as well as practical question.

Use of calculator is allowed.

This examination is closed book, closed notes and closed neighbours.

Do not ask question about the contents of this examination from anyone.

You may wish to pace yourself with your own watch, but the Supervisor will be the

official timekeeper of the test.

Failure to comply with the Supervisor’s directions will result in your test being

cancelled. Please comply with supervisor’s directions to avoid any unpleasant event.

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For Teacher's use only Question 1 2 3 4 5 6 7 8 9 10 Total

Marks Question 11 12 13 14 15 16 17 18 19

Marks Question

Marks Question No: 1 ( Marks: 1 ) - Please choose one Macroeconomics is concerned with: ►

Only changes in the overall price level.

►

Only long-run trends in economic activity.

►

Both long-run trends and short-run fluctuations in economic activity.

►

Only short-run fluctuations in the business cycle.

Question No: 2 ( Marks: 1 ) - Please choose one Real GDP (gross domestic product) is measured: ►

In the prices of a base year.

►

In current dollars.

►

At a constant output level but at current prices.

►

As the difference between the current year’s GDP and last year’s GDP.

Question No: 3 ( Marks: 1 ) - Please choose one Suppose U.S. Steel sells steel to Chrysler for $3,000, and then this steel is used in a Voyager van that is sold to a new car dealer for $12,000. The car dealer then sells the van to a family for $14,000. In this scenario GDP has risen by: ►

$29,000.

► $26,000.

►

$14,000.

►

$12,000.

Question No: 4 ( Marks: 1 ) - Please choose one In product markets: ►

Firm supply products, which households demand.

►

Households supply inputs, which firm demand.

►

Households supply goods and services, which businesses demand.

►

Households demand outputs, which firm supply.

Question No: 5 ( Marks: 1 ) - Please choose one The narrowest definition of money supply is: ►

M2.

►

M3.

►

M1.

►

M4.

Question No: 6 ( Marks: 1 ) - Please choose one Unemployment means that: ►

At the current wage, there are people who want to work but cannot find work.

►

There is excess demand in the labor market.

► There are some people who will not work at the current wage.

►

People are not willing to work at the current wage.

Question No: 7 ( Marks: 1 ) - Please choose one In the circular flow diagram, firms ________ inputs and households ________ products. ►

supply; demand

►

demand; supply

►

supply; supply

►

demand; demand

Question No: 8 ( Marks: 1 ) - Please choose one While imposing tax the inflation rate is not considered. It is called: ►

Progressive tax system.

►

Proportional tax system.

►

Unfair tax treatment.

►

Sales tax.

Question No: 9 ( Marks: 1 ) - Please choose one Suppose that an individual is working at home without pay. That person would be counted as: ►

Employed.

►

Unemployed.

►

Not in the labor force.

►

Self employed.

Question No: 10 ( Marks: 1 ) - Please choose one Economic growth is best measured as an increase in: ►

Real output per person.

►

Nominal GDP.

►

Investment.

►

Household consumption.

Question No: 11 ( Marks: 1 ) _________________ is the ability of a single person or firm to unduly influence market prices. Question No: 12 ( Marks: 1 ) _____________________ measures the price of output relative to its price in the base year. Question No: 13 ( Marks: 1 ) The real interest rate adjusts to equate demand with ____________. Question No: 14 ( Marks: 1 ) Monetary policy is the control over the __________________. Question No: 15 ( Marks: 1 ) ____________________ are measured in physical units: quantities and relative prices. Question No: 16 ( Marks: 5 ) Define stock and flow variables and also sort out the following stock and flow variables. Wealth, GDP, Income, expenditure, capital, Number of people losing their jobs, Amount of investment, Government debt. (Marks 1+4) Question No: 17 ( Marks: 5 )

From where does the demand for loanable funds come? What is the relationship between the demand for loanable funds and price of loanable funds? Question No: 18 ( Marks: 5 ) Define purchasing power parity (PPP). Give the two reasons why purchasing power parity (PPP) does not hold in real world? Question No: 19 ( Marks: 10 ) Define quantity equation. Explain quantity theory of money. (2+8)

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