Assessment Mode: Closed Paper No.6 Date of setting: Jan 7.2016 Examiner: Part 1 Multiple choices (20 points, 2 point for each) 1. Suppose that in January 2014 in your country, 200 million pcople are working, 20 million are not B. Full marks: 100 Reviewer: 7.1 working but are looking for work, and 40 million are not working and have given up looking for work. The official unemployment rate for that month is: A. 77% C, 10% D. 23% 2. Suppose the consumption equation is represented by the following: C-100+ 0.75Yo. The multiplier in this economy is A. 0.75 B. 1.33 C. 2 D. 4 3. The paradox of saving suggests that an increase in the desire to save will cause: B. A reduction in GDP D. No change in equilibrium GDP A. An increase in equilibrium GDP C. An increase in the desire to invest 4. Suppose the central bank wishes which of the following to occur? A. A central bank purchase of bonds and an increase in the interest rate B. A central bank purchase of bonds and a reduction in the interest rate C. A central bank sale of bonds and an increase in the interest rate D. A central bank sale of bonds and a reduction in the interest rate 5. Suppose the money supply decreased. Which of the following events could cause this? A. An increase in the monetary base B. A decrease in the ratio of reserves to deposits C. A shift in public preferences away from currency toward current account deposits D. None of the above to conduct expansionary monetary policy. Given this, we would expect Pag
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.
6. d. Both goods and financial markets are in equilibrium
7. c. An increase in the inflation. Phillips curve claims that there is an inverse relation between rate of unemployment and rate of inflation.
8. d. 4% nominal money growth and 4% inflation rate bothe counter balance each other leading ot growth rate of zero.
9. c. 166.67 (200/1.20)
10. d. Medium of exchange, unit of account and store of value: money is a function of four, unit, exchange, standard and store
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