Question

1. The 1973 oil crisis was considered one of the major causes of the "stagnation" in the 1970s. Which of the following best describes the direct effect of the sudden increase in oil price?

Select one:

a. The Aggregate Supply curve shifted to the left.

b. The Aggregate Supply curve shifted to the right.

c. Equilibrium shifted to the right along the Aggregate Supply curve.

d. Equilibrium shifted to the left along the Aggregate Supply curve.

2. According to which financial theory are stock prices a random walk?

Select one:

a. Shiller's analysis of stock price movements and subsequent dividends.

b. The New Keynesian theory

c. The efficient markets hypothesis

d. All of the above.

3.Which of the following policy sets would be characterized as "developmental state" strategy?

Select one:

a. Reducing trade barriers, eliminating subsidies, cutting back government expenditures, and specializing in the export of primary commodity (agricultural products and minerals).

b. Integrating banks with the global financial system, introducing a floating exchange rate,and decreasing labor costs.

c. Selective tariffs to protect infant industries, direct subsidies or preferential access to credit for specific sectors, increasing government expenditure, and diversifying economic activity.

d. Dollarization, free-trade agreements, and independence of central bank.

Answer 1

Answer 1:

Correct option is option a.

With the increase in the oil prices Aggregate supply curve will shift towards the left because with increase in price same quantity that was supplied before will now be supplied at higher price.

Answer 2:

Correct option is option c.

It is the efficient market hypothesis that states that stock prices reflects all the information about the stocks and moves in a random manner according to the intrinsic value of the stock.

Answer 3:

Correct option is option d.

Under the development state strategy an economy takes measures to develop itself including opening up of the economy to the world. It includes measures like adopting a standard currency, reducing import duties, allowing exports and giving independence to banks.