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Unformatted text preview: ASSIGNMENT 1 Section I: Multiple Choice Questions (Total Marks 50) 1. The velocity of money (V) is equal to A) V L x (V + V 1 x (r + π e ). B) V L + (V + V 1 x (r + π e ). C) V L (V + V 1 x (r + π e ). D) V L / (V + V 1 x (r + π e ). 2. If foreign real income decreases, A) the slope of the planned expenditure line will increase. B) the intercept of the planned expenditure line will increase. C) the slope of the planned expenditure line will decrease. D) the intercept of the planned expenditure line will decrease. 3. The economy will be in equilibrium when A) planned expenditure equals real GDP. B) national income equals real GDP. C) planned expenditure equals planned private savings. D) government purchases equal tax revenue. 4. If the tax rate increases, the marginal propensity to expend will _______ and the value of the multiplier _______. A) increase; increase. B) increase; decrease. C) decrease; increase. D) decrease; decrease. 5. The slope of the IS curve depends on A) the value of the multiplier and the responsiveness of baseline autonomous spending to real interest rate changes. B) the value of the multiplier and the responsiveness of investment spending and exports to real interest rate changes. C) the inverse of the value of the multiplier and the responsiveness of baseline autonomous spending to real interest rate changes. D) the inverse of the value of the multiplier and the responsiveness of investment spending and exports to real interest rate changes. 6. In the flexibleprice model of the macroeconomy with a given velocity of money and real GDP, the price level is equal to A) (V / Y) x M....
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 Winter '09
 TASSO
 Macroeconomics, Inflation

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