36. (05.05 LC) In macroeconomics, "crowding out" is apt to have which effect on the economy in the long run? (1 point) An increase in the natural rate of unemployment A lower real interest rate A lower level of full-employment real GDP Increased private sector investment A lower level of inflation 37. (05.06 LC) The aggregate production function shows a positive relation between the output produced and capital used per worker. What does the slope of the production function signify? (1 point) The slope of the production function shows by how many folds the country's economic growth has increased. The slope of the production function shows how many workers are required to produce a given amount of output The slope of the production function shows how much extra output a worker produces when given an extra unit of capital. The slope of the production function shows how much output a worker produces with the given amount of capital. The slope of the production function shows how much output is produced in a financial year. 38. (05.06 MC) With the advancement in technology and an increase in labor productivity, the output of an economy increases. How is this phenomenon analogous to the outward shift of the long-run aggregate supply curve? (1 point) The decrease in output shifts the production possibility curve outwards and is similar to the rightward shift in the long-run aggregate supply curve. The increase in output shifts the production possibility curve inwards and is similar to the rightward shift in the long-run aggregate supply curve. The increase in output shifts the production possibility curve outwards and is similar to the rightward shift in the long-run aggregate supply curve. The decrease in output shifts the production possibility curve outwards and is similar to the leftward shift in the long-run aggregate supply curve. The increase in output shifts the production possibility curve outwards and is similar to the leftward shift in the long-run aggregate supply curve.39. (05.07 MC) Which of the following policy initiatives is most likely to increase economic growth? (1 point) Subsidized training in human capital Central bank selling government bonds Subsidizing consumption 4 + Deficit spending to supplement pension payments Lowering the official retirement age from 65 to 60 years 40. (05.07 MC) Which of the following is the expected outcome of a reduction in income taxes on high-income individuals? (1 point) Only decrease aggregate demand Increase aggregate demand and increase aggregate supply Increase aggregate demand and decrease aggregate supply Only increase aggregate supply Decrease aggregate demand and decrease aggregate supply 42. (06.03 MC) With the rapid growth of the Indian economy, we can witness the rise in foreign direct investment and investors' interest in buying Indian assets. Which of the following best explains the consequence of a rise in such economic transactions? (1 point) The demand for Indian rupee will decrease in the foreign exchange market. The demand for U.S. dollars will increase in the foreign exchange market. The supply of Indian rupee will increase in the foreign exchange market. The supply of U.S. dollars will decrease in the foreign exchange market. The supply of U.S. dollars will increase in the foreign exchange market.21. (04.05 MC) Which of the following events increases an individual's demand for money to hold? (1 point) The bond prices in the economy decrease. The central bank decreases the interest rate. The individual reduces his expenditure. The individual's income decreases. The price level in the economy decreases. 23. (04.05 MC) How does inflation influence the interest rate and the demand for money in the economy? (1 point) When prices fall, the interest rate is also expected to fall, and the demand for money decreases. When prices fall, the interest rate is expected to rise, and the demand for money is unaffected. When prices rise, the interest rate is also expected to rise, and the demand for money increases. When prices rise, the interest rate is expected to fall, and the demand for money is unaffected. When prices rise, the interest rate is expected to fall, and the demand for money increases. 24 (04.06 MC) Assume that an economy is going through a slump and is experiencing less than ideal output levels and a decreased national income. In a banking system with limited reserves, which one of the following actions can a central bank take in order to fix the economy? (1 point) The central bank advises the government to increase taxes. The central bank increases the discount rate for commercial banks. The central bank increases the reserve ratio of commercial banks. The central bank of the country lowers its administered interest rates. The central bank of the country sells securities via open market operations.25. (04.07 MC) Which of the following explains the difference between the national savings in a closed economy versus an open economy? (1 point) In a closed economy, net capital inflows are considered in the national savings, but they are not in the case of an open economy. In an open economy, net private savings are considered in the national savings, but they are not in the case of a closed economy. In an open economy, capital outflows are considered in the national savings, but they are not in the case of a closed economy. In an open economy, net capital inflows are considered in the national savings, but they are not in the case of a closed economy. In an open economy, net government revenue is considered in the national savings, but it is not in the case of a closed economy. 27. (05.01 MC) Which of the following policy combinations will be most effective in reducing a high rate of inflation? Assume the banking system operates with limited reserves. (1 point) Central bank selling government bonds and increasing income taxes Increasing government spending, and the central bank buying government bonds Central bank increasing the discount rate and reducing government spending Increasing government spending and increasing taxes by equal amounts Central bank selling government bonds and increasing government spending 28. (05.01 MC) What is the effect of the government increasing social welfare and the central bank buying securities on the output and employment of an economy? (1 point) The output will be unaffected, and unemployment will decrease. The output will decrease, and unemployment will also decrease. The output will increase, and unemployment will also increase. The output will increase, and unemployment will be unaffected. The output will increase, and unemployment will decrease.43. (06.04 HC) The government of country B follows an expansionary fiscal policy by increasing government spending. What will the immediate (short-run) impact of such a move be on the foreign exchange rate? (1 point) The currency of country B depreciates against the currency of other countries, due to a decrease in interest rates as a result of large government spending. The currency of country B appreciates against the currency of other countries, due to an increase in interest rates as a result of large government spending. The currency of country B appreciates against the currency of other countries, due to a decrease in interest rates as a result of large government spending. The currency of country B depreciates against the currency of other countries, due to an increase in interest rates as a result of large government spending. The currency of country B remains at the same value as against the currency of other countries, regardless of an increase in interest rates as a result of large government spending. 44. (06.05 HC) Assume that a country X engages in activities that lead to a depreciation of its currency. What is the impact of currency depreciation on net exports of a country? (1 point) Currency depreciation will not affect the exports but will affect the imports of a country. Demand for imports from abroad increases. Net exports will fall. Net exports will remain unchanged. The net exports will rise. 45. (06.06 MC) The central bank increases the real interest rates by pursuing a contractionary monetary policy. What will the consequence of such a policy be on the net capital inflow? (1 point) The net capital inflow will decrease. The net capital inflow will remain constant. The net capital inflow will increase. The net capital inflow will become zero. The net capital inflow could either rise or fall depending upon the output of the economy.33. (05.04 MC) Which of the following best explains the difference between a government debt and a budget deficit? (1 point) A deficit occurs when government spending exceeds tax revenue in a financial year, and the government debt is the deficit accumulated over many years. A deficit occurs when government spending exceeds tax revenue in a financial year, and the government debt is the deficit accumulated at the end of the year. A deficit occurs when government spending exceeds transfer payments in a financial year, and the government debt is the deficit accumulated over many years. A deficit occurs when government spending is less than tax revenue in a financial year, and the government debt is the deficit accumulated over many years. A deficit occurs when tax revenue is less than transfer payments in a financial year, and the government debt is the deficit accumulated at the end of the year. 34. (05.04 MC) Which of the following statements about deficits and debt is true? (1 point) If the government run a fiscal surplus, it will increase its external debt. Interest payments on the national debt can limit other spending options that the government might have. Government represents the sum of all borrowing by banks from the central bank, minus any repayments. When economy-wide interest rates increase, the value of outstanding debt increases. In most developed countries, foreigners are prohibited from owning the country's bonds or debt. 35. (05.05 MC) Which of the following policy measures can lead to a crowding-out effect in an economy that has a budget deficit? (1 point) Decreasing the government spending Increasing the government spending Increasing the taxes for households The central bank decreasing reserve ratio The central bank selling bonds