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
brief
notes
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.
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- Winter '15
- ArunLata
- Inflation, Monetary Policy
