Beykent University

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Faculty of Economics and Administrative Sciences

Assistant Professor Doctor Ferhat SAYIM

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1

•If the MPC for the economy is 0.8, the

a)  MPS is 1/0.8

b) the multiplier is 5

c) the multiplier is undefined

d) the MPS is 0.4

e) the multiplier is 8

b

2

•If an economy experiences a period of rapid inflation,

a)  the level of investment will increase

b)  net exports will rise since more goods are imported

c)  nominal GNP will rise faster than real GNP

d)  nominal household spending falls

c

3

After the addition of government and foreign trade

•Equilibrium is now where

a)Y = C + I + X – Z

b)Y = C + I + G + B-T

c)Y = C + I

d)Y = C + I + G + B-T+X – Z

d

4

According to the balanced budget multiplier, an equal increase in government spending and taxes results in no change in aggregate output.

a)  True

b) False

b

5

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

a)  personal saving and private investment

b) personal saving and personal consumption

c) personal consumption and personal income

d) personal consumption and private investment

d

6

Which of the following is not a function of money?

a) a medium of exchange

b) a unit of account

c) a shelter against inflation

d) a store of value

c

7

•The CPI is

a)  an index of prices for a basket of goods

b)  a weighted index of selected commodity prices

c)  the most commonly used measure of price behaviour

d)  often used to describe changes in a nation's inflation rate

e)  all the above

e

8

•If excess reserves of £1000 can generate a maximum increase in the money supply of £3000, the legal reserve requirement is

a) 0.67

b) £2000

c) 0.3

d) 0.33

d

9.

•The principle of the multiplier states that

a) any increase in aggregate spending that causes the aggregate demand curve to shift will result in a larger increase in national income

b)  in the long run, the aggregate demand curve becomes relatively flat as the economy approaches full employment

c) any increase in national income will result in a larger increase in aggregate spending

d)  for any given increase in income, there will be a less than proportional increase in consumer spending

a

10

•As used in economics, the 45 degree line

a)  represents consumption plus planned investment

b) contains only a consumption component

c) shows various combinations of total spending and income equality

d) shows those income levels where the marginal propensity to save is 1

c

11

•Other things constant, if the MPS is 0.2 and investment spending increases by £500 million, then total income will rise by £2.5 billion.

a)  True

b) False

a

12

•The marginal propensity to consume is the rate at which aggregate demand increases when investment spending increases.

a)  True

b)  False

b

13

•Government expenditure affects the position of the AD schedule.

a)  True

b) False

a

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.........................mechanisms in the economy that reduce the response of GNP to shocks; for example, in a recession:

payments of unemployment benefits rise

and receipts from VAT and income tax fall

a)Budget Deficit

b)Aggregate Demand

c) Automatic stabilisers

d)GNP

c

15

Why can’t shocks to aggregate demand immediately be offset by fiscal policy?

Explain Shortly.

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d

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………ways in which the central bank MAY influence money supply

A-)1 B-)2 C-)3 D-)4

C

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