5. According to life cycle-PIH theory of consumption, an individual's: A. mpc out of wealth is fairly large B. mpc out of transitory income is fairly small C. level of consumption will decrease if hislher retirement age is increased D. none of the above
6. The IS curve is; 7. If a country has a balance of payment surplus, than we know for sure that: 8. In a model with no government or foreign sector, if autonomous consumption is C=500, the marginal propensity to save is, mps=0.25, and income is Y=800, then the total consumption is; 9. Given the Keynesian AS curve, expansionary monetary policy would: A. Increase income but leave the price level unchanged B. Increase the price level but leave the income unchanged C. Increase both income and the price level D. Leave income and price level unchanged 10. If the economy is in a steady state;
Question 11: Short Notes (30marks) Write a briefnotes on the following concepts. Do not exceed 100 words per question. (a) Identify three internationally acceptable sources of growth. (b) Justify at least three reasons for price stickiness in a Keynesian world (c) Discuss the random walk model of consumption (d) The simple life-cycle hypothesis predicts that people save over their working years but dissave during their retirement years. Do we actually observe such behaviour? If not, can you explain why not? (e) In the classical aggregate supply curve model, the economy is always at the full-employment level of output and the unemployment rate is always zero. Comment on this statement.