Question

True or False

1. The loanable fund market demand is the demand for consumption.

(           ) 2. An increase in the bond price increases the bond yield.

(           ) 3. An increase in the stock price increases the stock rate of return.

(           ) 4. Monopoly increases unemployment, but monopsony does not.

(           ) 5. The open market operation is the changes in interest rate in open market.

(           ) 6. The high reserve requirement has the direct relationship with money creation.

(           ) 7. The money value and price level have inverse relationship.

(           ) 8. The nominal interest rate is related to inflation.

(           ) 9. An inflation tax is the tax put on inflation.

(           ) 10. Government expenditure belongs to the aggregate supply.

(           ) 11. 1973-1975 recession is due to aggregate demand shift.

(           ) 12. 2001       recession is due to aggregate demand shift.

(           ) 13. As potential GDP is smaller than actual GDP, recession occurs.

(           ) 14. A money supply results in shift of aggregate supply GDP.

(           ) 15. The multiplier effect is bigger as marginal propensity to consume is smaller.

(           ) 16. The multiplier effect comes together with crowding effect.

(           ) 17. A recession results in decrease of welfare program.

(           ) 18. A recession results in decrease of tax revenue.

(           ) 19. The unemployment and inflation are in inverse relation.

(           ) 20. The unemployment and inflation relation does not related to aggregate demand.

(           ) 21. A quota deceases export

(           ) 22. A tariff decreases import.

(           ) 23. A real exchange rate is not related to nominal exchange rate.

(           ) 24. A purchasing power parity exchange rate is not related to nominal exchange rate.

(           ) 25. A flexible exchange rate is not related to nominal exchange rate.

(           ) 26. The export increases consumer surplus.

(           ) 27. The trade deficit results in capital inflow.

2. Summarize

            (1) loanable fund market

            (2) monetary policy tools

            (3) quantity equation

            (4) Okun's law

            (5) mutiplier effect and crowding effect

            (6) automatic stabilizers

            (7) risk aversion and risk taking

            (8) Fisher effect

            (9) aggregate model

            (10) aggregate demand shift

            (11) Phillips curve

            (12) protectionist policies

            (13) capital inflow and capital outflow

Answer 1

(1) False

Loanable funds market demand is the demand for investment.

(2) False

Increase in bond price decreases yield since price and yield are inversely related.

(3) False

Rate of return = Return from stock / Stock price, so higher stock price will lower rate of return.

(4) False

(5) False

Open market operation is the purchase or sale of securities in open market by central bank, to increase/decrease money supply.

(6) False

The higher (lower) the reserve requirement, the less (more) money that banks can extend as loans, and the lower (higher) the change in money supply. So there is an inverse relationship.

NOTE: As per Answering Policy, 1st 6 questions are answered.