Economics-QA154

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Suppose there is an open market purchase of bonds by the central bank. Such an event will cause
 
1. an increase in bond prices and an increase in the interest rate (i)

2. a reduction in bond prices and an increase in i

3. an increase in bond prices and a reduction in i

4. a reduction in bond prices and a reduction in i

 
The LM curve will shift when which of the following occurs?
 
1. a reduction in taxes

2. an increase in output

3. an open market sale of bonds

4. all of the above

5. none of the above

 
Suppose the private sector only hold currency (i.e. there are no banks). The demand for money is given by
Money demand = $Y(0.4 – i)
The nominal income is $100 and the supply of money is held fixed at 25. Starting from the initial equilibrium suppose nominal income increases to $125. The increase in income will ________ the demand for money and the new equilibrium interest rate will be ________ .
 
1. increase; 0.15

2. increase; 0.2

3. decrease; 0.1

4. decrease; 0.05

 
Suppose a bond offers to pay $1000 in one year and currently sells for $900. Given this information, we know that the interest rate on the bond is
 
1. 9%.

2. 10%.

3. 11.1%

4. 90%

5. 110%

 
The IS curve will shift when which of the following occurs?
 
1. a reduction in government spending

2. an increase in taxes

3. a reduction in consumer confidence

4. all of the above

5. none of the above

 
If investment spending is very sensitive to the interest rate, then
 

1. the IS curve should be relatively flat

2. the IS curve should be relatively steep

3. the LM curve should be relatively flat

4. the LM curve should be relatively steep

5. neither the IS nor the LM curve will be affected

 
If nominal GDP rises from $100 billion to $120 billion, while the GDP deflator rises from 2.0 to 2.2, the percentage change in real GDP is
 

1. -10.00%

2. 10.00%

3. 1.10%

4. 9.09%

 
Based on our understanding of the IS-LM model with the central bank holding the interest rate constant, we know that a tax cut:
 
1. must cause investment spending to decrease

2. must cause investment spending to increase

3. will cause no change in investment spending

4. may cause investment spending to increase or decrease

5. a reduction in money demand and a reduction in the interest rate

 
Which of the following events would cause a reduction in the size of the multiplier?
 
1. an increase in the marginal propensity to consume

2. an increase in the marginal propensity to save

3. a reduction in taxes

4. a reduction in government spending
 
The CPI is determined by computing
 
1. an average of prices of all goods and services.

2. the price of a basket of goods and services that changes every year, relative to the same
basket in a base year.

3. the price of a fixed basket of goods and services, relative to the price of the same basket in a base year.

4. nominal GDP relative to real GDP.

 
Which of the following expenditure items is NOT included in fixed investment spending (I)?
 
1. Holden buys a new robot for its Commodore assembly line

2. Dell Australia increases its inventories of unsold computers.

3. Ford builds a new factory in Sydney

4. An individual buys a newly-built home for herself and her family

 
Suppose that in January 2005 in Australia, 10 million people are working, 1 million are not working but are looking for work, and 6 million are not working and have given up looking for work. The official unemployment rate for that month is:
 
1. 14.29%

2. 9.09%

3. 5.88%

4. 37.50%
 

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A farmer sells $1000 worth of apples and $200 worth of flour to a supermarket. A baker purchases those apples for $1200 and the flour for $300. The baker uses these ingredients to sell $2000 worth of apple pies. The value added by the baker is
 
1. $200

2. $300

3. $1000

4. $500
 
Suppose there is a simultaneous tax cut and open market sale of bonds. Which of the following must occur as a result of this?
 
1. Output increases

2. Output decreases

3. The interest rate increases

4. The interest rate decreases

5. Both output and the interest rate increase
 

Suppose the consumption equation is represented by the following: C = 100 + .75(Y-T). The multiplier in this economy is ________.
 
1. 0.25

2. 2

3. 4

4. 1.33
 
Suppose the private sector only holds currency (i.e. there are no banks). The demand for money is given by ,Money Demand = $Y(0.4 – i) Nominal income is $100 and the supply of money is held fixed at 25. The equilibrium interest rate in the money market is:
 
1. 0.15

2. 0.2

3. 0.3

4. 0.4

 

Use the following information to answer the question below.
 
C = 1000 + .8(Y-T)
I = 800
G = 1800
T = 1000
 
The equilibrium level of GDP for the above economy equals
 
1. 10000

2. 14000

3. 16000

4. 20000
 
Based on our understanding of the IS-LM model with the central bank holding the money supply constant, we know that a tax cut:
 
1. must cause investment spending to decrease

2. must cause investment spending to increase

3. will cause no change in investment spending

4. may cause investment spending to increase or decrease

5. a reduction in money demand and a reduction in the interest rate

 

An increase in the price of goods bought by firms and the government will show up in
 

1. the GDP deflator but maybe not in the CPI.

2. both the CPI and the GDP deflator.

3. neither the CPI nor the GDP deflator.

4. the CPI but not in the GDP deflator.

 
Which of the following prices are included in the GDP deflator, but not included in the Consumer Price Index?
 

1. firms’ purchases of new equipment

2. intermediate goods and services

3. imports

4. consumption goods and services

 
Product code: Economics-QA154
 
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