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# ECO403 latest MCQs for Final Papers

Gross domestic product measured in terms of the prices of a fixed, or base, year is:

Base GDP.
Current GDP.
Real GDP.
Nominal GDP.

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.

Keeping in mind the functions of money, which one of the following is not money?

Currency
Checks
Credit cards
Time deposits

Which of the following would not be included in M2?

Demand deposits
Checking accounts
Money market accounts
None of the given options

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

45-degree line.
Consumption function.
Investment function.
Consumer price index.

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).

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.

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.

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.

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.

Which of the following would a macroeconomist consider as investment?

Fred purchases 100 shares of stock in Microsoft.
Tom buys a new tractor for his farm.

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.

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.

Intermediate goods are counted in the calculation of GDP.

True
False

Structural unemployment is the unemployment resulting from real wage rigidity
and job rationing.

True
False

As income rises, average propensity to consume (APC) falls.

True
False

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

The deposits that banks have received but have not lent out are called banks
investments.

True
False

The determinants of demand curve include:

Income, tastes, and the price of the good.
Income and tastes.
Tastes and the price of other goods.
Income, tastes, preferences and the price of other goods.

Which  of  the  following  is  TRUE  about  the  measurement  of  nominal  Gross
Domestic Product?

It is measured in current dollars.
It is measured in fixed dollars.
It is measured at a constant output level.
It is measured as the difference between the current year’s GDP and last year’s GDP.

Which of  the  following plays  the most  important role  in  increasing  the rate of
growth in real GDP per capita over time?

Increases in labor productivity
Increases in the money supply
Decreases in the level of inflation
Increases in the real rate of interest

Refrigerators are examples of which of the following?

Transfer products
Non-durable goods
Services
Durable goods

Which of the following is NOT a factor of production?

Land
Labor
Capital
Investment

In  a  macroeconomic  model  without  foreign  trade  or  government  spending,
aggregate demand is the sum of:

Personal saving and private investment.
Personal saving and personal consumption.
Personal consumption and personal income.
Personal consumption and private investment.

Which of the following appears in M2 but NOT in M1?

Checking account balances
Currency
Travelers' checks
Money market mutual funds

If  inflation  falls  from  6  percent  to  4  percent  and  nothing  else  changes,  then
which of the following will happen according to the Fisher effect:

Both the nominal and the real interest rates fall by 2%.
Neither the nominal interest rate nor the real interest rate changes.
The nominal interest rate falls by 2% and the real interest rate remains constant.
The nominal interest rate does not change, but the real interest rate falls by 2%.

In terms of the demand for money, the interest rate represents:

The price of borrowing money.
The return on money that is saved for the future.
The rate at which current consumption can be exchanged for future consumption.
The opportunity cost of holding money

Increased levels of consumption:

Shift aggregate supply to the right.
Shift aggregate supply to the left.
Shift aggregate demand to the right.
Shift aggregate demand to the left.

The rate at which commercial banks borrow from the central bank is known as:

Inflation rate.
Interest rate.
Discount rate.
Reserve requirement rate.

The  currency  exchange  rate  causes  a  shift  of  the  aggregate  demand  curve
through a change in:

Consumption.
Investment.
Net exports.
Transfer payments.

Dissaving occurs if:

Saving is negative.
National income is negative.
Personal income is negative.
The Marginal Propensity to Consume is negative.

In the Keynesian Cross model, the aggregate expenditure line has a slope of:

0.
1.
Less than 1.
Greater than 1.

IS* curve shows the negative relationship between which of the following?

Nominal exchange rate and price level.
Nominal exchange rate and output level.
Nominal exchange rate and interest rate.
Output and interest rate.

A  classical  aggregate  supply  curve  shows which  of  the  following  relationship
between the price level and output?
Aggregate supply is positively related to real output.
Aggregate supply is negatively related to real output.
Aggregate supply is unrelated to the price level.
Aggregate supply is horizontal.

IS curve shows the equilibrium in:

Money market.
Goods market.
Labor market.
Financial market.

Under a  freely  flexible exchange rate  system, a deficit  in a nation’s balance of
payments is corrected by:

A depreciation of the domestic currency.
None of the given options.
A depreciation of the foreign currency.
An appreciation of domestic currency.

In the Mundell-Fleming model, M/P = L (r*, Y) is the:

LM* equation.
AS equation.
None of the given options.
IS* equation.

If a consumer faces a borrowing constraint then:

He will be unable to consume anything in the second period.
He may or may not be less satisfied than if he was able to borrow.
Consumption in the first period must be less than consumption in the second period.
All of the given options.

According to Permanent Income hypothesis, when income < permanent income
then:
Average Propensity to Consume rises.
Average Propensity to Consume falls.
Average Propensity to Consume remains constant.
Average Propensity to Consume first falls then rises.

The housing price determines the flow of which of the following?

Gross investment.
Residential investment.
Depreciation investment.
Inventory investment.

------------------- is defined as the number of rupees held by the public.

Quantity of money.
Velocity of money.
Supply of money.
Demand for money.

In principle, a decrease in required-reserve ratios would:

Decrease deposits.
Increase the money supply.
Decrease excess reserves.
Increase required reserves.

The deposits that banks received but do not lent out are known as:

Reserves.
Excess reserves.
Required reserves.
All of the given options.

The three major controls of monetary policy are:

Reserve ratios, the discount rate, and moral suasion.
Reserve ratios, the discount rate, and open-market operations.
Margin regulations, the discount rate, and moral suasion.
Margin regulations, the discount rate, and open-market operations.

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