Course code aedits Course NameM MATIeconoms Course Name Full

Course code: aedits: Course NameM MATIeconoms. Course Name Full marks: 100 Duhrion of test 120 mins Anesimen ModeClosst Reviewer:- Dte ofsenng :-) 12016- Examiner: Part1 Multiple choices (20 points, 2 point for each) 1. Suppose that in January 2014 in your country, 200 million people are working, 20 million are not workig but ane looking for work, and 40 million are not working and have given up looking for work. ig but looking for The official unemployment rate for that month is: C. 10% D. 23% Suppose the consumption equation is the consumption oquation is represented by the following: C- 100+ 0.75Yo- The multiplier in C.2 D. 4 A. 0.75 The paradox of saving suggests that an increase in the desire to save will cause: A. An increase in equilibrium GDP C. An increase in the desire to invest Suppose the central bank wishes to conduct expansiocary monetary policy. Given this, we would expect ich of the following to occur? B 1.33 B. A reduction in GDP D. No change in equilibrium GDP A central bank purchase of bonds and an increase in the interest rate A central bank purchase of bonds and a reduction in the interest rate A central bank sale of bonds and an increase in the interest rate A central bank sale of bonds and a reduction in the interest rate Suppose the money supply decreased. Which of the following events could cause this? An increase in the monetary base A decrease in the ratio of reserves to deposits shift in public preferences away from currency toward current account deposits None of the above Pa

Solution

1. c) 10% (20/200)

2. d 4 (1/1-0.75 = 1/0.25 = 4)

3. A decrease in GDP With increase in savings, people\'s income fall because one man\'s expenditure is another man\'s income.

4. b. A central bank purchase of bonds and reduction in interest rates because it will lead to more currency in the hands of people and second will reduce the cost of credit and more credit will be demanded.

5. d. None of the above as all above will lead to increase in money supply.