Question

- According to the neutrality of money property, how does once-and-for-all increase in the aggregate quantity of money affect the interest rate i in the long run?

Select one:

a. Not enough information to answer the question.

b. i increases

c. It does not affect i

d. i decreases

2. In the Solow Model with no technological changes, when capital depreciates faster than it is accumulated we may conclude that the capital stock per worker:

Select one:

a. will rise if no changes in population

b. will rise if population increases.

c. will remain the same

d. will fall

3. In the extended IS-LM model which includes a role for expectations, consider the following four statements:

I. The IS curve in this model is steeper relative to the basic IS-LM model without expectations.

II. If expectations about future output improve, the IS curve shifts to the right.

III. If expectations about future output improve, the LM curve shifts to the right.

IV. If expectations about future output improve unexpectedly, stock market prices increases under the efficient market hypothesis.

Which of the above statements are correct?

Select one:

a. Statements I, II and IV

b. Statements I and II

c. Statements II and III

d. Statements I, II and III

Answer #1

1) Money neutrality refers to that In long run there is no change in real variable,only nominal variable changes.

So Increase in Money supply will decrease interest rate in short run Increase gdp.

In long run pricr adjustment lead to decrease in gdp and increase in price level and thus Decrease real money supply and thus increase interest rate to its Initial Level.

OPTION C is correct

2) change in capital per worker= saving/ capital accumulation - Depreciation- population growth

So it will decrease if depreciation is higher than capital accumulation.

3) option B is correct

Statement 1,2 are Right

Statement 4 is not related to IS LM model.

1- In Keynes’s underemployment model with fixed money wages, if
there is an exogenous fall in investment, the economy will settle
at a lower price level leading to
a- a shift in the LM curve to the right and real wage to
rise.
b- a shift in the LM curve to the left and real wage to
fall.
c- a shift in the LM curve to the left and real wage to
rise.
d- a shift in the LM curve...

1. In the short-run IS-LM model with income taxation, taxes are
given by ?=? +??. Suppose that MPC = 0.75 and the marginal tax rate
?=0.2. Then, when ? decreases by 1000, then for any given interest
rate, the IS curve shifts:
Select one:
a. to the left by 1000.
b. to the right by 3000.
c. to the right by 3750
d. to the right by 1875.
2.
Suppose that the adult population in an economy is 28 million,...

1). Suppose in Pakistan the macroeconomic variables i* (foreign
interest rate), P (domestic aggregate price level), P* (foreign
aggregate price level), Y* (foreign income level), straight pie
(domestic expected inflation), T (domestic net taxes), and G
(domestic government spending) are exogenously given, the interest
parity condition holds, and the expectations of the future economic
trends remain unchanged. In this situation, if the foreign
aggregate price level, P*, declines, the IS curve
a. would not shift.
b. would shift to the...

Explain very briefly if the following statements are true or
false. Mathematical or graphic treatment will be appreciated
wherever possible or necessary.
5. In Keynes’ model the labor market clears at such a real wage
rate at which both households and firms maximize their utility and
profit respectively.
6. In the classical model, the quantity theory of money holds at
all times postulating that real money balances are demanded in
proportion to real income. Therefore, we can express this as...

1. Recall the classical economists and one of their
favorite theories: the quantity theory of money and monetary
neutrality. The theory is expressed as an equation as follows: M x
V = P x Y. What does V stand for?
a. the value of the domestic currency
b. the velocity of money
c. the virtual reality of the universe
d. the velocity of investment spending in the economy
2. Following up on question 1 above, what does Y represent?
a....

Consider the AD-AS model, with the AD curve derived from the
quantity theory of money. Suppose the economy is initially in
long-run equilibrium, when there is a sudden rise in demand for
real balances for any given level of output, and simultaneously
also an improvement in productive technology that permanently
increases how much firms can produce with any given amount of the
factors of production.
(a) Immediately following these shocks, what happens to
velocity? To the AD curve? The LRAS...

Q1 - The number of adults (people greater than or equal
to 15 years of age) that are considered officially unemployed (by
government-calculated statistics) is typically different from (and
usually less than) the number of adults actually without a job.
This situation may arise because:
i) The labor force (as calculated by government
statistics) is inclusive only of adults who are either employed or
actively seeking employment.
ii) Full-time students, homemakers, and retirees are not
considered part of the labor...

11. Demand-pull
inflation occurs when the aggregate __________ curve shifts
_______.
A. demand, right
B. demand, left
C. supply, right
D. supply, left
12. When the
aggregate price level decreases, the resulting decrease in interest
rates will most likely ___________ investment and _____________
consumption.
A. increase, increase
B. increase, decrease
C. decrease, increase
D. decrease, decrease
13. The economy is
operating at full capacity. The long-run aggregate
supply curve is __________. In the long run, an increase
in the aggregate price level will __________ output.
A. horizontal, increase
B. horizontal, not change
C. vertical, increase
D. vertical,...

If there is a sudden increase in the demand for money, what
could the Fed do to hold interest rates steady at their current
levels? Select one: a. Cut taxes. b. Sell government securities. c.
Raise the discount rate. d. Raise the required reserve ratio. e.
None of the above is correct
. Which of the following sequence of events follows a decrease
in the discount rate? Select one: a. r↓ ⇒ I↓ ⇒ AE↓ ⇒ Y↑ b. r↑ ⇒...

The crowding out effect is zero if
Select one:
a. the LM-curve is vertical
b. the central bank conducts open market sales following fiscal
expansion
c. income is stimulated via a tax cut rather than an increase in
government spending
d. the central bank conducts open market purchases following
fiscal expansion
e. the LM-curve is horizontal
An asset (other than money) is considered to be more liquid
if
Select one:
a. it can be quickly and cheaply transferred into money...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 6 minutes ago

asked 9 minutes ago

asked 11 minutes ago

asked 20 minutes ago

asked 24 minutes ago

asked 38 minutes ago

asked 57 minutes ago

asked 57 minutes ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago