08 1st Sem Final

08 1st Sem Final - PART A: MULTIPLE CHOICE QUESTIONS Circle...

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PART A: MULTIPLE CHOICE QUESTIONS Circle the correct answer in each of the following question. Answer all (35) questions. 35 marks are available, 1 for each question. 1. In a small open economy with a floating exchange rate, if the government imposes a tariff on foreign goods, then in the new short-run equilibrium: A) imports will decrease while exports remain constant, leading to a rise in net exports. B) imports will decrease and exports will increase, leading to a rise in net exports. C) imports will decrease and exports will decrease by an equal amount. D) both imports and exports will remain unchanged. 2. The real wage is assumed to bring labor supply and labor demand into equilibrium in each model except the: A) sticky-price model. B) sticky-wage model. C) imperfect-information model. D) classical model. 3. If the per-worker production function is given by y = k 1/2 , the saving ratio is 0.3, and the depreciation rate is 0.1, then the steady-state ratio of capital to labor is: A) 1. B) 2. C) 4. D) 9. 4. Arguments in favor of passive economic policy include all of the following except : A) monetary and fiscal policies work with long and variable lags, which can produce destabilizing results. B) economic forecasts have too large a margin of error to be useful in formulating stabilization policy. C) recessions do not reduce economic well-being, so using monetary and fiscal policy for stabilization is unnecessary. D) the Great Depression could have been avoided if the Federal Reserve had pursued a policy of steady money growth. 5. A trade deficit can be financed in all of the following methods except by: A) borrowing from foreigners. B) selling domestic assets to foreigners. C) selling foreign assets owned by domestic residents to foreigners. D) borrowing from domestic lenders. 6. The tradeoff between inflation and unemployment does not exist in the long run because people will adjust their expectations so that expected inflation: A) exceeds the inflation rate. B) equals the inflation rate. C) is below the inflation rate. D) equals the inflation rate of the previous year. 7. In the basic endogenous growth model, income can grow forever—even without exogenous technological progress—because: Page 1 of 9
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A) the saving rate equals the rate of depreciation. B) the saving rate exceeds the rate of depreciation. C) capital does not exhibit diminishing returns. D) capital exhibits diminishing returns. 8. In a small open economy, if the government encourages investment, say through an investment tax credit, investment: A) increases and is financed through an increase in national saving. B) increases and is financed through an increase in exports. C) increases and is financed through an inflow of foreign capital. D)
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08 1st Sem Final - PART A: MULTIPLE CHOICE QUESTIONS Circle...

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