University of Gondar

College of Business and Economics

School of Economics
Model Exit Exam II for Economics Graduate
Students
1. The stage of project life cycle where the project gets green light for
implementation is
A. Project identification
B. Project appraisal
C. Project preparation
D. Project monitoring and evaluation

Answer: B

2. Which of the following arrangement is correct while we are moving

from the general to specific
A. Policy →Plan → Program →Project
B. Plan →Policy →Project →Program
C. Plan →Policy →Program →Project
D. Policy →Program →Plan →Project
E. None

Answer: A

3. ____________is the number of years required to cover the initial

investment cost of a project.

A. The cutoff period C. Economic life

B. Payback period D. Project life

Answer: B
4. The one that makes social cost benefit analysis different from financial
analysis is that in the case of financial analysis
A. Narrowing the disparity between the rich and the poor receives
greater attention
B. The weight attached to merit goods is zero
C. All externalities will be considered as much as the measurement
is possible
D. The measurement of costs and benefits is indirect

Answer: B

5. Which of the following correctly ordered in terms of scope

A. Input →Output→Outcome →Impact
B. Input→Outcome →Output →Impact
C. Input→Output →Impact →Outcome
D. Input→Outcome →Impact →Output
E. None
Answer: A
6. Unlike financial analysis, economic analysis is highly concerned with
the following except
A. Societal wellbeing’s
B. National income change
C. The receiver of the project’s fruits
D. None
Answer: D

7. Which of the following is NOT considered in monitoring?

A. Counting the number of people trained.
B. Tracking the number of brochures disseminated.
C. Attributing changes in health outcomes to an intervention.
D. Collecting monthly data on clients served in a clinic.
Answer: C
8. Evaluations measure all of the following except
A. The timeliness of a program's activities.
B. The outcomes and impact of program's
C. How closely a program kept to its budget
D. How well the program was implemented.
E. None
Answer: E
9. The objective of an impact analysis is
A. It can used to determine the outcomes and impacts of a project
B. It checks for the efficiency of services provided to enable more
output
C. It measures project results and calculates the financial values of
a project
D. All
Answer: A
10. A primary reason why nations conduct international trade is
because:
A. Some nations prefer to produce one thing while others produce
another
B. Resources are not equally distributed to all trading nations
C. Trade enhances opportunities to accumulate profits
D. Interest rates are not identical in all trading nations
Answer: B
11. In one of the following trade theory pattern the gains from trade
are explained in terms of absolute and comparative advantage?
A. New Trade theory B.Neo-classical C. Classical trade
theory D. None
Answer: C
12. The comparative advantage model of Ricardo was based on
A. Intra-industry specialization and trade
 B. Inter-industry specialization and trade
C. Demand conditions underlying specialization and trade
D. Income conditions underlying specialization and trade
Answer: B
13. Which industrialization policy have developing countries used
which places emphasis on the comparative advantage principle as a
guide to resource allocation:
A. Export promotion
B. Import substitution
C. International commodity agreements
D. Multilateral contracts
Answer: A
14. To help developing nations strengthen their international
competitiveness, many industrial nations have granted non-reciprocal
tariff reductions to developing nations under the:
A. International commodity agreements program
B. Multilateral contract program
C. Generalized system of preferences program
D. Export-led growth program
Answer: C
15. One of the following is not the dynamic benefits of integration
A. Additional competition made possible by the opening of markets
B. Administrative cost saving from the elimination of customs
officers
C. Economies of large scale production as markets open Increased
Competition
D. Better Utilization of Economic Resources
Answer: B
16. In which of the following regional integration Ethiopia is a
member?
A. ECOWAS B. COMESA C. UMA D. SADC
 Answer: B

17. The implementation of a common market involves all of the

following except:
A. Elimination of trade restrictions among member countries
B. A common tax system and monetary union
C. Prohibition of restrictions on factor movements
D. A common tariff levied in imports from nonmembers
Answer: B

18. Which of the following school of thought contribute marginal

analysis?
A. Classical B. Monetarism C. Keynesian
D. Neo Classical
Answer D
19. Which of the following statement is correct about CPI and GDP
Deflator?
A. GDP Deflator measures the price of goods and services bought
by consumers.
B. GDP Deflator considers goods produced abroad.
C. CPI uses a fixed basket (base-year quantities)
D. CPI measures the price of all goods and services
Answer C
20. Although, forward looking consumption theorists have argued
people save to smooth future consumption however, --------------
research output shows people don’t save as much as a perfectly
rational lifetime utility maximizer would save.
A. Irving Fisher B. Milton Friedman C. David Laibson
D. Robert Hall
Answer C
21. Which of the following statement is correct about IS-LM model?
A. Keynesian cross is basic model of interest rate determination
 B. Theory of Liquidity Preference is basic model of income
determination
C. Intersection of IS and LM curves shows the unique point (Y, r)
that satisfies equilibrium in both the goods and trade markets.
D. IS curve slopes downward because planned investment depends
negatively on interest rate
Answer D
22. One is wrong about multiplier?
A. The Tax Multiplieris smaller than the government spending
multiplier.
B. Government spending multiplier between zero and one
C. The Tax Multiplieris negative
D. Government spending multiplicative impact on income is much
bigger than the initial change in government spending.
Answer B
23. Which of the following statement is correct about exchange rate?
A. Under a system of floating exchange rates, the exchange rate is
set by market forces.
B. Under floating exchange regimecommitment of a central bank is
required to limit exchange rate level
C. Reduction in the official value of domestic currency is a solution
for forex shortage in flexible exchange economy
D. Fixed exchange rates, allows monetary policy to be used for
other purposes such as stabilizing employment or prices.
Answer A
24. One of the following statement is true about aggregate supply?
A. Aggregate supply curve is vertical in the short run
B. Aggregate supply curve is vertical in the long run
C. Aggregate supply curve is upward sloping in the long run
D. Aggregate supply curve is horizontal in the short run
Answer B
 25. Macroeconomic policy would be effective in changing the real
macroeconomic variables( employment, output) if the policy is
A. Fiscal with perfectly mobile capital and flexible exchange regime
B. Monetary with immobile capital and flexible exchange regime
C. Monetary with perfectly mobile capital and fixed exchange
regime
D. Fiscal with perfectly mobile capital and fixed exchange regime
Answer D

26. A researcher chooses whether to use a model for prediction or to

use it for further analysis based on:
A. Hypothesis testing
B. Forecasting
C. Statistical inference
D. A and C
E. All of the above

Answer D

27. The OLS method estimates Bo and B1 by

A. Minimizing the sum of residuals
B. Minimizing the sum of squared differences between predicted
values and observed values
C. Minimizing the sum of squared residuals
D. both B and C
Answer D

28. The meaning of linearity in regression theory is that it is

A. Linear in variables
B. Linear in variables non linear in parameters
C. Linear in parameters
D. Linear in variables and parameters
Answer C
 29. The coefficient of determination, r2 shows.
A. Proportion of the variation in the dependent variable Y is
explained by the independent variable X
B. Proportion of the variation in the dependent variable X is
explained by the independent variable Y
C. Proportion of the variation in the dependent variable ui is
explained by the independent variable X
D. Both A and C
Answer A

30. The statistic that can be used to test hypotheses about a single
population parameter is:
A. F statistic
B. t statistic
C. χ2 statistic
D. Durbin Watson statistic

Answer B

31. Which of the statements are true?

A. Confidence intervals provide a range of likely values for a
population parameters
B. When the standard deviation of a coefficient increases, the
confidence interval increases
C. When the sample size of a regression increases, the confidence
interval for the coefficient estimate narrows down
D. Both A and C
Answer B

32. The normality assumption implies that:

A. The population error u is dependent on the explanatory variables
and is normally distributed with mean equal to one and variance
σ2 .
 B. The population error u is independent of the explanatory
variables and is normally distributed with mean equal to one and
variance σ.
C. The population error u is dependent on the explanatory variables
and is normally distributed with mean zero and variance σ.
D. The population error u is independent of the explanatory
variables and is normally distributed with mean zero and
variance σ2
Answer D

33. A regression model with a symptom of multicollinearity results:

A. High R2 with few significant t ratios for coefficients
B. High pair-wise correlations among regressors
C. High R2 and all partial correlation among regressors
D. VIF of a variable is below 10
Answer D

34. What is the marginal rate of substitution (MRS)?

A. The slope of the budget constraint.
B. The rate at which a consumer is willing to trade one good for
another while remaining on the same indifference curve.
C. The price ratio of the two goods.
D. The rate at which a consumer's income is depleted as he or she
purchases more of a good.
Answer B

35. The law of diminishing marginal utility states that:

A. As the price of a good increases, demand for the good will
decrease.
B. As a consumer's income increases, demand for a good will
increase.
 C. As a consumer consumes more of a good, the additional
satisfaction from each unit consumed decreases.
D. As a production process becomes more efficient, the price of a
good will decrease
Answer C

36. Which of the following is an example of moral hazard?

A. An individual hiding a pre-existing medical condition from an
insurance company to obtain lower premiums.
B. A used car salesman providing incomplete information about a
car's history to a potential buyer.
C. An employer offering limited job security to employees.
D. The market is unable to differentiate between high-risk and low-
risk individuals.
Answer A

37. If we know that capital is fixed and a business firm can produce
36 units of output per day with 3 workers and 44 units of output per
day with 4 workers, then we know all of the following except
A. The MP is below the AP
B. The firm has passed the point of diminishing marginal
productivity
C. The AP of three workers is 12
D. We know all the above
Answer D

38. Suppose a firm was using 10 units of labor and 20 units of capital
to produce 100 units of output. If the labor input increases to 15 and
capital to 30 and output increases to 150, then the firm is experiencing
A. Increasing returns to scale
B. Constant returns to scale
 C. Decreasing returns to scale
D. We cannot determine
Answer B

39. Suppose the only variable input is labor and its reward (wage) is
birr 150, fixed cost of capital is 40 birr and the reward for capital is 100
birr. What would be the total cost of the firm if we hired 4 labors and 2
capital?
A. 600 birr B. 400 birr C. 800 birr D. 640 birr
Answer D

40. In the long run, in a perfectly competitive market, economic

profits for the industry will:
A. Always be positive
B. Always be zero
C. Fluctuate over time
D. Depend on government regulations
Answer B
41. What is deadweight loss in the context of monopolies?
A. The loss of consumer and producer surplus due to inefficient
allocation of resources.
B. The loss of profits experienced by monopolistic companies.
C. The loss of market share experienced by competitive firms.
D. The loss of government revenue resulting from monopolistic
practices.

Answer A

42. Which one of the following is true about urbanization and

development
A. There is correlation between economic development and
urbanization in developed countries
B. There is positive correlation between economic development and
urbanization in developing countries
 C. Correlation and causation between urbanization and economic
development works in developing country.
D. All

ANSWER: A

43. which one of the following statement is correct as urban

population increases in developing countries
A. Rural and urban population will remain the same
B. Both rural and urban population increase in percentage
C. Both rural and urban population increase in percentage and number
D. Rural population increase in number and decrease in percentage

ANSWER: D
44. Which of the following is not the limitation of Malthus model
A. It is based on simplistic assumptions
B. He advocates the impact of technological progress
C. Micro economic family size, individual and not aggregate variable
D. None

ANSWER: B
45. Which one is incorrect based on micro economic theory of
fertility
A. The demand for child increase as income rise
B. The demand for child increase as the price of raising a child
decrease
C. The demand for child decrease as the price of other substituting
goods increase
D. None.

ANSWER: C
46. Which of the following statement is incorrect
A. The problem of population growth is the problem of welfare and
development.
B. World population has been distributed evenly by geography and age
structure.
C. . Population growth rate and doubling time of population are
inversely related.
 D. According to the Harris Todaro model the migration of labour to
urban centres continue until expected urban wage is equal with
rural wage.

ANSWER: B
47. What will be your suggestion to increase agricultural production
and productivity?
E. Improvement in agricultural marketing system
F. Stability in price.
G. Mechanisation of farms.
H. All of the above.

ANSWER: D
48. The main characteristic of an underdeveloped economy is that it
has a ________.
A. State of deprivation among large proportions of the population
B. High per capita income
C. A large proportion of the about force is in the tertiary sector
D. None of the above

ANSWER: A
−x

49. The derivative of

f ( x )= e ( x−2 )
is:
−x

A. f ( x )= e ( 3−x )
'

' −x

B. f ( x )= e ( 2−x )
−x

C. f ( x )= e (1−x )
'

D. f ( x )=−e ( x−2 )−2 e

' −x −x

E. None of the above.

ANSWER: A
 x −2 x + x
3 2
f ( x )=
50. Determine whether the functions and

x −3 x +4 , for x ∈ ℜ are strictly convex, strictly concave, or neither

2
g ( x )=

over the specified intervals.

A. f ( x ) is neither strictly convex nor strictly concave & g ( x ) is strictly

concave.
B. f ( x ) is neither strictly convex nor strictly concave & g ( x ) is strictly
convex.
C. f ( x ) is neither strictly concave nor saddle & g ( x ) is strictly convex.
D. f ( x ) is neither strictly convex nor strictly concave & g ( x ) is not
strictly convex.
E. None of the above.

ANSWER: B

51. Find the value of x&y which maximize.

2 2
f ( x , y )=5 x+ 10 y+ xy −0 .5 x −3 y
A. X=9 & y=4
B. X=3 & y=8
C. X=8 & y=3
D. X=4 & y=9
E. None of the above.

ANSWER: C

52. Assume that you are an investor, and then your short-run total

Q =10 Q +17 Q+66 .

3 2
C=
cost function is Compute the output level at
which you maximize profit if P=5.
A. Q=0.8
B. Q=2/3
C. Q=6 & Q=2/3
D. Q=6
E. None of the above.

ANSWER: D
 53. Based on question number 4, compute the output elasticity of
cost at this out put.
A. 0.8
B. 0.6
C. 0.66
D. 5
E. None of the above.

ANSWER: A

54. Let the demand & cost functions of a monopolist be

Q −10Q+ A
2
P=100−3Q+4 √ A and
C=4
where A is the level of
advertising expenditure. Determine the values of A, Q&P which
maximize profit.
A. A=30;Q=175;P=15
B. A=900;Q=15;P=175
C. A=30;Q=15;P=175
D. A=30;Q=175;P=15
E. None of the above.

ANSWER: B

55. Assume that the cost functions of two firms producing the same

C =2Q +20Q −2 Q Q &C =3 Q +60 Q

2 2

1 1 1 1 2 2 2 2
commodity are: . Compute
the output levels of the firms on the assumption that each equates its
corresponding MC to a fixed market price of Birr 240 thousand.

A. Q =30 &Q =70

1 2

B. Q =35 &Q =15

1 2

C. Q =70 &Q =30

1 2

D. Q =15 &Q =35

1 2

E. None of the above.

ANSWER: C
 56. Based on question number 7 above, & if social cost function is

C= C +C
1 2
, then determine their output level on the assumption that
each equates its social MC to the market price.

A. Q =58 &Q =84

1 2

B. Q =48 &Q =85

1 2

C. Q =85 &Q =48

1 2

D. Q =84 &Q =58

1 2

E. None of the above.

ANSWER: D

−2
F ( x )=
57. Expand the non-polynomial (rational) function
( x +1 )
aroud

x =10 n=3 .
the point ,with

(i )
3
F ( x )≈∑
f ( 1)
( x−1 ) + R
(i )

3
A. i=0 i!

( −2
)
(i ) (i)
3
F ( x ) ≈∑
f ( 1)
+ R 3
i!
B.
i=0
X +1
(i )
3
F ( x )≈∑
f ( 1)
( x+1 ) + R
(i )

3
C. i=0 i!
(i )
3
F ( x )≈∑
f ( 1)
( x−1 )
(i )

D. i=0 i!
E. None of the above

ANSWER: A

58. In the National Income Determination considering the usual two

sector model. Suppose that the rate of change of income is
 proportional to the excess expenditure,C+ I −Y that is

dy
=μ (C + I − Y ) , C = 0. 5 Y , I t =300 and also μ=2 ,
t t t
dt if t t +100

i. Determine the Differential equation of the standard form.

ii. Solve the general solution of the first order differential

equation, when 0 =2000 y

iii. Verify the qualitative nature of the system.

dy
A. dt
=−0 .1 y +800 y =−6000 e
t
t
−0 .1 t
+ 8000
; and the system explode from
t →∞
the inter-temporal equilibrium as .

dy
B. dt
=−0 .1 y +800 y =−6000 e
t
t
−0 .1 t
+ 8000
; and the system tends to the

t →∞ y t =∞ → ssv =8000
inter-temporal equilibrium as which means
dy
C. dt
=−0 .1 y +800 y =−6000 e
t
t
−0 .1 t
+ 8000
; and the system deviate’s both

from the inter-temporal equilibrium and from the homogeneous

t →∞
part as
dy
D. dt
=−0 .1 y +800 y =−6000 e
t
t
−0 .1 t
+ 8000
; and the system tend to the
t →∞
homogeneous part as
E. None of the above.

ANSWER: B

59. Economic growth measures the

A. growth of productivity
 B. increase in nominal income
C. increase in output
D. none of the above

ANSWER: C

60. With perfect income equality the Gini coefficient in a country

would be
A. infinity C. 5
B. 1 D. 0

ANSWER: D

61. All but one of the following are methods to represent overall
income inequality:
A. variance
B. Gini coefficient
C. ratio of the top income decile to the lowest income decile
D. Lorenz curve
E. GDP per capita

ANSWER: E

62. If the distribution of income in country C is (1, 2, 2, 3, 5) and the

poverty line is 2.5, the headcount measure tells us what percentage of
the population is in poverty
A. 40 C. 2
B. 3 D. 60

ANSWER: D

63. he Lewis model of the dual economy makes the following

assumption(s)
A. The rural wage initially remains constant
B. Industry makes a profit by employing cheap labor
C. Rural wage will rise when industry expands sufficiently
D. all of the above
E. none of the above

ANSWER: D
 64. The Gini coefficient provides a measure of:
A. the level of poverty
B. the level of relative inequality
C. disguised unemployment
D. the rate of growth

ANSWER: B

65. If 's' is the savings rate and 'v' the capital-output ratio, then 'g'
the rate of growth in the Harrod Domar model is represented by
A. v/s. C. sv.
B. sv. D. s/v.

ANSWER: D
66. According to the Harrod-Domar model, an increase in growth
rates depends on
A. Increase in capital-output ratio
B. Decrease in capital-output ratio,
C. Increase in marginal propensity to consume,
D. None of the above

ANSWER: B

67. Economic growth measures the

A. growth of productivity
B. increase in nominal income
C. increase in output
D. none of the above

ANSWER: C

68. Economic growth is necessary and sufficient to eradicate most of

absolute poverty.
A. true
B. false

ANSWER: B
 69. Income level or GDP is criticized as an indicator of development
mainly because it takes no account of the distribution of income.
A. true
B. false

ANSWER: A

70. With perfect income equality the Gini coefficient in a country

would be
A. infinity C. 5
B. 1 D. 0

ANSWER: D

71. All but one of the following are methods to represent overall
income inequality:
A. variance
B. Gini coefficient
C. ratio of the top income decile to the lowest income decile
D. Lorenz curve
E. GDP per capita

ANSWER: E

72. Examine the following diagram:

The Gini coefficient is

A. A/(A+B) C. A/B
B. B/(B+A) D. (A+B)/A

ANSWER: A
 73. If the distribution of income in country C is (1, 2, 2, 3, 5) and the
poverty line is 2.5, the headcount measure tells us what percentage of
the population is in poverty
A. 40 C. 2
B. 3 D. 60

ANSWER: D

74. If the distribution of income in country C is (1, 2, 2, 3, 5), and in

country D it is (1, 1, 2, 3, 5), and the poverty line in both countries is
2.5, by the headcount measure which country has more poverty?
A. C
B. D
C. poverty is the same in C and D
D. dwe cannot tell from the information given

ANSWER: C

75. Both the Ricardian growth model and the Lewis model share the
assumption that population growth will outpace food production in the
long run.
A. true
B. false

ANSWER: B

76. The Lewis model of the dual economy makes the following
assumption(s)
A. The rural wage initially remains constant
B. Industry makes a profit by employing cheap labor
C. Rural wage will rise when industry expands sufficiently
D. all of the above
E. none of the above

ANSWER: D

77. The endogenous growth model confirms the neoclassical model's

implications about convergence.
A. true
 B. false

ANSWER: B

78. Which is a measure of absolute poverty?

A. Headcount.
B. Average income shortfall.
C. Sen Index.
D. All of the above.

ANSWER: D

79. The Gini coefficient provides a measure of:

A. the level of poverty
B. the level of relative inequality
C. disguised unemployment
D. the rate of growth

ANSWER: B

80. If 's' is the savings rate and 'v' the capital-output ratio, then 'g'
the rate of growth in the Harrod Domar model is represented by
A. v/s. C. sv.
B. sv. D. s/v.

ANSWER: D

81. Balanced growth theories of Ragnar Nurkse advocate

A. a steady rate of growth of GNP
B. parity between capital stock and labor
C. simultaneous development of all sectors of the economy
D. all of the above.
ANSWER: C

82. According to the Harrod-Domar model, an increase in growth

rates depends on
A. Increase in capital-output ratio
B. Decrease in capital-output ratio,
C. Increase in marginal propensity to consume,
D. None of the above
ANSWER: B

83. In the Harrod-Domar model, it is assumed that the elasticity of

substitution between capital and labor is
A. Infinite, C. between zero and one,
B. One, D. Zero

ANSWER: D

84. Except one the following are true

A. Product differentiation is intended to distinguish the product of one
producer from that of the other producers in the industry.
B. Selling cost and advertisement appears in perfect competitive
market structure
C. The aim of product differentiation is to make the product unique in
the mind of the consumer.
D. None
Answer B
85. One of the following is correct
E. Game theory is the study of rational behavior among
interdependent agents
F. Player is an agent who makes decision in a game
G. Payoff is the number, utility that reflects an outcome of a player
H. All
Answer D
Based on the payoff matrix given below answer the following two questions
Firm B
Strategies Increase Price Decrease
Price
Firm A Increase 2000, 2000 4000, 0
Price
Decrease 0, 4000 3000,3000
Price

86. Which one is dominant strategy equilibrium pair of strategy for

Firm-A and Firm B respectively
A. (Decrease, increase) C. (Increase, increase)
B. (Increase, decrease ) D. (Decrease, decrease)
Answer C
 87. Adverse selection usually occurs due to
A. Signaling C. Unanticipated risks
B. Moral hazard D. Asymmetric information
Answer D
88. Which one is false
A. Pareto optimality refers to a situation in which resources are
allocated efficiently
B. Social optimality refers to a situation in which resources are
allocated efficiently
C. Social optimality refers to equitable/just distribution of income in
addition to efficient allocation of resources.
D. A&C
Answer B
89. Identify the wrong statement
A. Factor pricing refers to the determination of wage, interest,
capital& rent
B. Factor pricing requires some insight in to the demand and supply of
a factor market
C. The product market has no any impact on factor pricing
D. None.
Answer C
90. The equilibrium of the firm, according to the kinked-demand
model of non collusive oligopoly occur:
A. At the point of the kink C.
B. At the point of the discontinuous portion of the MR D
C. The lefts and right of the kink
D. A & B.
Answer D
91. Given that P=105 –2.5X C1=5X1 C2=15X2 where the low cost
firm is the price leader determine the profit maximizing price &output
for the leader firm respectively?
A. A) 55&10 C. 55 &9
B. 60&9 D. 60&10
Answer A
92. Which of the following is true about relationship of price, interest
rate and exchange rate?
 A. If there is inflation in the country, the country’s exchange rate will
be appreciated
B. If there is inflation in the foreign country, then domestic currency
will be appreciated
C. When the price level increase in the economy, interest rate will be
decreased
D. At the ceteris paribus, as the money supply increase in the
economy; interest rate will be increased.
Answer B

93. Which of the following is not true about the foreign exchange
rate?
A. One of the foreign exchange rate function is purchasing power
transfer function
B. Hedging function is one of the important functions of the foreign
exchange rate market.
C. Devaluation is one of the monetary policies which can be
implemented in the floating exchange rate regime.
D. Forward transactions maturity date is more than two business days
in the future.
Answer C

94. Which of the following is true?

A. Balance of payment takes into account all types of transactions
of a country with the rest of the world.
B. Balance of trade is the comprehensive account of international
trade.
C. Devaluation represents deflation of the prices of domestic
goods to increase exports.
D. In International Trade, the two main accounts are current
account and reserve accounts.
Answer A

95. Meeting the demand for foreign currencies to ensure

International Payments is called?
A. Appreciation of international currency
B. International Liquidity
C. Revaluation of international currency
D.Depreciation of international currency
Answer B

96. If the base year nominal exchange rate in the Ethio-US foreign
exchange market is 40.5 birr per USD, and after a year there has been
20% inflation in Ethiopia while the inflation in USA is zero percent; then
what is the real exchange rate?
A. 33.75 Birr/USD
B. 40.5 Birr/USD
C. 54 Birr/USD
D.60.5 Birr/USD

Answer A

97. Which of the following is not true about purchasing power parity?
A. A currency should buy the same quantity of goods when it
converted to another currency as it can buy at home.
B. It is applicable for both tradable and non-tradable goods
C. PPP is more applicable in the long-run than in the short-run
D.PPP implies that the instantaneous American price deflation is
accompanied by an instantaneous dollar appreciation on the
foreign exchanges.
Answer B
98. Which of the following is true about the fiscal and monetary
policy at ceteris paribus?
A. Monetary policy is effective in floating exchange rate regime.
B. Fiscal policy is effective in floating exchange rate regime
C. Monetary policy is effective in both fixed and floating exchange
rates.
D. Expansionary fiscal policy can increase output in floating
exchange rate.
Answer A

99. Which one of the following is not true at the ceteris paribus?
A. As the tax rate increase, the aggregate consumption will be
decreased.
B. As the government expenditure increase, aggregate demand will
be increased
 C. As the tax rate increase, aggregate demand (output) will be
increase
D. As the tax rate increased, the price level will be increased
Answer C