Question 1

Policy Neutrality is the main proposition of:

Accepted Answer

A)  supply side economics.
B)  keynesian economics
C)  monetarism
D)  rational expectations hypothesis D

Question 2

ISLM model was developed by:

Accepted Answer

A)  hicks
B)  keynes
C)  friedman
D)  none of these A

Question 3

When saving is greater than investment in a two-sectormodel,

Accepted Answer

A)  outputshould increase
B)  output should decrease
C)  output should not change
D)  none of these B

Question 4

When there is an increase in the autonomous money supply, ceteris paribus, LM shifts:

Accepted Answer

A)  leftward
B)  rightward
C)  no shift
D)  none

Question 5

Who invented the General Equilibrium analysis?

Accepted Answer

A)  l. walras.
B)  w. leontief
C)  j.m.keynes.
D)  none of these.

Question 6

The LM curve has a------slope

Accepted Answer

A)  positive
B)  negative
C)  zero
D)  none of these

Question 7

The marginal productivity of labour is:

Accepted Answer

A)  the incremental output due to an increase in capital, ceteris paribus
B)  the incremental output due to an increase in labour, ceteris paribus.
C)  the incremental output due to a change in technology, ceteris paribus
D)  the incremental output due to a change in technology and a change in the

Question 8

An Economic model is a statement of relationship among economic ------

Accepted Answer

A)  variables
B)  phenomena
C)  development
D)  none of these

Question 9

When investment is negatively related to the rate of interest, equilibrium output in the goods market:

Accepted Answer

A)  is unrelated to the rate of interest
B)  is inversely related to the rate of interest
C)  is positively related to the rate of interest
D)  falls as the rate of interest decreases

Question 10

The natural rate of unemployment equals the sum of those who are:

Accepted Answer

A)  frictionally and structurally unemployed
B)  frictionally andcyclicallyunemployed
C)  structurally andcyclicallyunemployed
D)  frictionally structurally and cyclically unemployed

Question 11

The perfectly elastic segment of the LM curve is:

Accepted Answer

A)  keynesian range
B)  classical range
C)  intermediate range
D)  none of these

Question 12

Simultaneous equilibrium in the money (LM) and goods (IS) market exists:

Accepted Answer

A)  at an unlimited number of output levels and rates of interest
B)  at only one output level and rate ofinterest
C)  at an unlimited number of output levels and only one rate of interest
D)  at only one output level and an unlimited number of rates of interest

Question 13

Which policy is effective in the intermediate range?

Accepted Answer

A)  monetary policy
B)  fiscal policy
C)  both policies
D)  none of these

Question 14

LM curve shows the equilibrium condition in ---------- market

Accepted Answer

A)  goods market
B)  product market
C)  money market
D)  none of these

Question 15

The IS curve has a------slope

Accepted Answer

A)  positive
B)  negative
C)  zero
D)  none of these

Question 16

The simplest ISLM model consists of:

Accepted Answer

A)  two markets
B)  three markets
C)  four markets
D)  five markets

Question 17

In which of the following situations will an increase in the money supply have no effect upon output?

Accepted Answer

A)  lm is steeply sloped and is is steeply sloped
B)  lm is vertical and is is steeply sloped
C)  lm is steeply sloped and is is vertical
D)  lm is relatively flat as is is

Question 18

The equilibrium in the product market is represented by which curve?

Accepted Answer

A)  is
B)  lm
C)  demand
D)  supply curve

Question 19

Frictional unemployment exists:

Accepted Answer

A)  when there is a decrease in real gdp
B)  because it takes time to find a job when one is first entering the labour force
C)  as a result of technological change
D)  when an individual retires

Question 20

Which policy is effective in the Classical range?

Accepted Answer

A)  monetary policy
B)  fiscal policy
C)  incomes policy
D)  none of these

Exam 2: Economics Model and Is-Lm Analysis