1.Keynesian economists believe:

A. the economy ought to be left to market forces.

B. government policies do not affect economic activity.

C. most government policies would probably make things worse.

D. government can implement policy proposals that can positively impact the economy.

2.Laissez-faire economists believe:

A. the government can implement policy proposals that can positively impact the economy.

B. government intervention in the market is necessary for a smoothly operating economy.

C. government policies do not affect economic activity.

D. most government policies would probably make things worse.

3.Keynesian economists focus their analysis on:

A. economic growth.

B. the long run.

C. the short run.

D, medium run aggregate supply.

4.Aggregate demand management policies are designed most directly to:

A. minimize inflation.

B. prevent budget deficits or surpluses.

C. minimize unemployment.

D. control the aggregate level of spending in the economy.

5.The paradox of thrift occurs when:

A. a decrease in saving reduces output.

B. an increase in saving reduces output.

C. an increase in saving raises output.

D. saving is unrelated to output.

6.Keynes believed that an increase in savings would:

A. raise aggregate demand by increasing consumption

B. reduce aggregate demand by reducing consumption.

C. raise aggregate demand by reducing investment.

D. reduce aggregate demand by reducing investment.

7.Keynes argued that:

A. both the short-run and the long-run are equally important.

B. the short-run is a more important policy concern than the long-run.

C. the long-run is a more important policy concern than the short-run.

D. the distinction between the short-run and the long-run is irrelevant.

8.A fall in the U.S. price level will cause foreigners to:

A. substitute their own domestically-produced goods for U.S. goods.

B. buy more of their own domestically-produced goods.

C. buy fewer U.S. goods.

D. substitute U.S. goods for their own domestically-produced goods.

9.This is for the India article.

India

MUMBAIIndia's central bank cut its interest rates to the lowest level in five years and announced steps to increase liquidity in the country's banking system, as it took stock of slowing inflation in Asia's third-largest economy.

The Reserve Bank of India lowered the repurchase rate by 0.25 percentage point to 6.5% from 6.75%, as predicted by all nine economists polled by The Wall Street Journal. It is the first rate cut since September.

The central bank also reduced the cash-reserve ratio, the percentage of deposits banks must park with the RBI, to 90% of the requirement from 95%, and cut the marginal standing facility, the emergency funding rate for banks, by 0.75 percentage point.

In recent weeks, the RBI has been increasing liquidity available to banks by purchasing bonds in open-market operations.

"Traditionally, the RBI has been keeping the banking system on a short liquidity leash to avoid inflation," said Sujan Hajra, an economist at Anand Rathi Securities in Mumbai. But lower inflation is allowing the bank to change course.

Most-recent government data show retail inflation eased to a four-month low of 5.2% in February thanks to a slowdown in food prices. The central bank said consumer-price inflation is expected to decelerate modestly and remain around 5% during the current fiscal year, with small quarterly variations. Last year the RBI said it expected inflation to fall below 6% by January.

India, which has long struggled with high inflation, is benefiting from the subdued outlook in global commodity prices. After roughly two years of a slowdown in price increases, household inflation expectations have started to moderate, the bank said in its monetary-policy report.

Making more cash available to commercial banks should encourage them to lower their lending rates, a move that is poised to accelerate a trickle-down effect through the economy, economists say.

Gov. Raghuram Rajan said Tuesday he would keep looking for opportunities to keep easing monetary policy further. "The stance of monetary policy will remain accommodative," Mr. Rajan said in a statement published after the rate decision. "The Reserve Bank will continue to watch macroeconomic and financial developments in the months ahead with a view to responding with further policy action as space opens up."

When it last reviewed its policy in February, the RBI kept rates unchanged. Mr. Rajan made it clear then that he still wasn't sure the government would keep the fiscal deficit under control this year.

In the federal budget presented late February, Finance Minister Arun Jaitley said the government will achieve its deficit target of 3.9% of gross domestic product for the financial year ended March 31, and confirmed that the budget gap will shrink to 3.5% in the year just started.

Data also point to slack in the economy. Factory output fell 1.5% in January, the third-successive month of contraction, driven by a sharp decline in the production of capital and consumer goods.

While economic activity lost pace in the second half of the fiscal year that ended in March, slowed by muted investment and a prolonged contraction in exports, the bank on Tuesday struck an upside note for the current fiscal year, saying it expects growth to reach 7.6%. India's economy expanded 7.3% in the three months to December, the government said in February.

While private consumption has been the mainstay in holding up aggregate demand, it has largely been an urban phenomenon: Indicators of rural growth remain in the red.

The global environment too seems more conducive for India to cut rates, economists say.

The U.S. Federal Reserve has scaled back expectations of the number of interest-rate increases it expects to make this year, helping stabilize Asian markets.

Falling global commodity prices and weak growth in major economies have also prompted many central banks to ease monetary policy. Indonesia lowered rates for the third time this year in March, while China in February was cutting the reserve requirements of banks. In the Philippines, expectations of a tighter policy have reversed, while in Taiwanthe central bank slashed rates(Links to an external site.)

for the third straight meeting last month.

In comparison, India has been relatively guarded. It cut rates four times last year. Before Tuesday it had left them unchanged for seven months.

Per the article, the cash reserve ratio was ________________. Due to this, banks will have to keep ___________ money with the RBI. Due to this banks will be able to lend out ______________.

A. Decreased; less; less

B. Increased; more; less

C. Decreased; less; more

D. Decreased; more; less

E. Increased; less; less

F. Increased; less; more

10.This is for the India article above.

Per the article, which component of GDP is stable?

A. investment

B. government spending

C. consumption

D. imports

E. exports