Scribd
Upload
14 views4 pages

Example Multiple Choice

Uploaded by

Nazanin Nejati
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
14 views4 pages

Example Multiple Choice

Uploaded by

Nazanin Nejati
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

Multiple choice: examples

1. What is the after-tax real interest rate (A) in the following case: the nominal interest rate is 10%,
the inflation rate is 5% and the tax rate is 20%?

A) A  1%
B) 1% < A  3%

C) 3% < A 5%
D) A > 5%

2. The diagram below represents the IS-LM model. Which of the following movements in
equilibruim may in the short run result from a fall in the price level?

A C

A) A movement from A to B.
B) A movement from A to D.
C) A movement from C to B.
D) A movement from C to D.

3. Which of the following statements is correct?


A: Insider-outsider theories provide an explanation for the existence of structural unemployment
B: Frictional unemployment is part of cyclical unemployment.
A) Both statements are correct.
B) Only statement A is correct.
C) Only statement B is correct.
D) None of these statements is correct.
4. Assume that the banking system initially has total reserves of €500 billion, while the reserve
requirement is equal to 50%. Assume also that banks hold no excess reserves and households
hold no currency. What would happen with total reserves and the total amount of money in the
economy if the reserve requirement would decrease to 25%?
A) The amount of money would increase by 50%, while the amount of reserves would remain
the same.
B) The amount of money would increase by 100%, while the amount of reserves would
decrease by 50%.
C) The amount of money would increase by 50%, while the amount of reserves would decrease
by 50%.
D) The amount of money would increase by 100%, while the amount of reserves would remain
the same.

5. Assume investment (I) only depends on the interest rate (I(i)). If the government has to borrow
less money next year than this year, in the short run this can be expected to:
A) Increase both the interest rate and the amount of investments (I).
B) Increase the interest rate and decrease the amount of investments (I).
C) Decrease the interest rate and increase the amount of investments (I).
D) Decrease the interest rate and decrease the amount of investments (I).

6. Assume an economy is initially in its long-run equilibrium. Subsequently, the country is hit by an
earthquake, which destroys a substantial part of the physical capital stock of the country. Which
of the following statements are correct?
Statement 1: The model of aggregate demand and supply predicts this country to be confronted
with stagflation.
Statement 2: If price stability is the primary aim of the central bank of this country, it will have to
conduct contractionary monetary policies in response.
A) Both statements are correct.
B) Only statement 1 is correct.
C) Only statement 2 is correct.
D) None of these statements is correct.
7. Consider two economies only differing from each other in the interest sensitivity of investment:
economy 1 has a high interest sensitivity of investment; economy 2 has a low interest sensitivity
of investment. Assume that in each of these economies, minimum reserve requirements for
banks are decreased in the same way. Which economy will face the strongest change in the
interest rate in the short run? Which economy will face the strongest change in output level in
the short run?
A) Both the interest rate and the output level change relatively more in economy 1 than in
economy 2.
B) The interest rate changes relatively more in economy 1; the output level changes relatively
more in economy 2.
C) Both the interest rate and the output level change relatively more in economy 2 than in
economy 1.
D) The interest rate changes relatively more in economy 2; the output level changes relatively
more in economy 1.

8. The diagram below represents the money market. Money is represented in nominal terms and
the value of money is plotted on the vertical axis. Which of the following statements are correct?
Statement 1: A movement from equilibrium point A to equilibrium point D is associated with a
decline in the price level.
Statement 2: A movement from equilibrium point A to equilibrium point B may, amongst others,
result from an increased inclination to hold money as cash instead of as demand deposits.

C
A

A) Both statements are correct.


B) Only statement 1 is correct.
C) Only statement 2 is correct.
D) None of these statements is correct.
9. Which of the following statements are correct?
Statement 1: Fiscal policies aimed at increasing output will be less effective when the crowding
out effect is stronger.
Statement 2: Technological progress results in declining prices when the central bank keeps the
money supply constant.
A) Both statements are correct.
B) Only statement 1 is correct.
C) Only statement 2 is correct.
D) None of these statements is correct.

10. Suppose 7,300,000 people are in the adult population. The labour force counts 5,300,000 people
and the number of unemployed individuals equals 598,000 people. Which of the following
statements is correct?
A) The unemployment rate equals 8.2%
B) The labour force participation rate equals 64.4%
C) The employment rate equals 64.4%
D) The number of employed individuals equals 5,300,000 people

You might also like