A fall in the demand for Malaysia exports would result in a rise in the exchange rate when

Select one:

a.

there is capital mobility.

b.

the country has a balance of payments surplus.

c.

exchange rates are allowed to float.

d.

there is no capital mobility and exchange rates are allowed to float.

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In a system of flexible exchange rates for Malaysia, a recession abroad would induce

Select one:

a.

a fall in the Malaysia's rate of foreign exchange.

b.

a balance of payments surplus for Malaysia.

c.

a rise in the Malaysia's foreign exchange rate.

d.

no change in the Malaysia's foreign exchange rate.

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In the simple Keynesian model, if the tax function is given by

T = 0.25 Y

and the consumption function is

C = 50 + 0.8 YD

then a 10-unit increase in government spending would increase equilibrium income by

Select one:

a.

20 units.

b.

10 units.

c.

25 units.

d.

30 units.

e.

15 units.

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An advantage of the use of an interest rate target is that this operating procedure is likely to provide

Select one:

a.

stability in the monetary base.

b.

stability in the money growth rate.

c.

stability of short-term interest rates.

d.

an end to procyclical movements in the money stock.

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Suppose that the MPC out of disposable income was 0.8 and the marginal tax rate was 0.25 for a given economy.In this case, the value of the tax multiplier in the simple Keynesian model would be

Select one:

a.

2.5.

b.

2.

c.

-2.

d.

1.

In accordance with the newer growth models, an increase in the saving rate implies:

Select one:

a.

no change in the rate of capital formation

b.

a long-run increase in the growth rate of output

c.

a short-run increase only in the growth rate of output

d.

a long-run decrease in the rate of capital formation

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Diminishing returns to changes in capital per worker implies that output increases:

Select one:

a.

at a decreasing rate when the capital-labour ratio rises

b.

at a decreasing rate when total productivity falls

c.

less than proportionally with equal increases in labor and capital

d.

proportionally with increases in labour and capital

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The Keynesian economists do not believe that a cut in the marginal income tax rate will have strong effects on aggregate supply because they

Select one:

a.

do not believe that labor supply will respond strongly to changes in the after-tax real wage.

b.

do not believe that labor demand will respond strongly to a change in the after-tax real wage.

c.

do not believe that business investment will respond strongly to changes in the after-tax rate of return to capital.

d.

believe monetary policy will be too restrictive to allow strong output growth.

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Which of the following statements is (are) correct?

Select one:

a.

Under a fixed exchange rate system, potential conflicts arise between the goals of internal balance and external balance.

b.

With a fixed exchange rate system, a central bank has to give up control over domestic interest rates but retains control over inflation.

c.

Countries may find that expansionary policies, which might be desired in order to reduce the unemployment rate, may lead to income levels that are too low to balance the trade account and could lead to balance of payments surpluses.

d.

Both (a)and (c)

e.

Both (b)and (c)

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According to the balance of payments schedule, as the level of income rises

Select one:

a.

both import demand and export demand decrease.

b.

both import demand and export demand increase.

c.

import demand increases while export demand does not.

d.

export demand increases while import demand decreases.

Which of the following statements is (are) correct?

Select one:

a.

A central element in the supply-side position is that, for intermediate-run periods, growth in output is determined by demand and not supply

b.

Only a few supply-side advocates would agree that demand is important in the short-run determination of income

c.

Some, perhaps most, supply-side economists agree that demand plays a role in the short-run determination of income

d.

Supply-siders do not accept the fact that demand has a place in the short-run determination of income

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In a system of perfectly flexible exchange rates, an expansionary U.S. monetary policy will cause

Select one:

a.

a fall in the value of the dollar relative to foreign currencies.

b.

a change in the value of the dollar relative to foreign currencies but the direction of the change is uncertain.

c.

no change in the value of the dollar relative to foreign currencies.

d.

a rise in the value of the dollar relative to foreign currencies.

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Evidence exists which supports the conclusion that technological change has largely resulted in increasing productivity of:

Select one:

a.

mostly labour

b.

both capital and labour

c.

neither capital nor labour

d.

mostly capital

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Which of the following are advantages of greater exchange rate flexibility?

Select one:

a.

The alleviation of potential conflicts that arise between the internal balance and the external balance.

b.

The insulation of the domestic economy from economic shocks.

c.

A recession abroad would not have contractionary effects on the domestic economy.

d.

Both (a) and (b).

e.

Both (a) and (c).

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An essentially classical feature in the supply-side perception of the saving-investment process is an emphasis on

Select one:

a.

income and, therefore, on aggregate demand.

b.

the importance of rates of return as influences on the rates of saving, investment, and thus capital formation.

c.

the inflation rate.

d.

None of the above