: Correctly answer the following questions.

The multiplier effect means that

A.consumption is typically several times larger than saving.

B.a small increase in consumption will cause a large decrease in investment.

C.a small decrease in investment spending will cause a large increase in the equilibrium

level of income/output (GDP).

D.a small change in investment spending will cause the equilibrium level of income/output (GDP)

to change by a larger amount.

One of the economic costs of unemployment can be measured by

A. the excess of real GDP over nominal GDP.

B. the excess of nominal GDP over real GDP.

C. the amount by which actual GDP exceeds potential GDP.

D. the amount by which potential GDP exceeds actual GDP.

You are given the following information about aggregate demand for an economy: (1)

consumption = $700 billion; (2) investment = $60 billion; (3) government purchases = $100

billion; and (4) net export = $20 billion. If the MPC is 3/4 and the no inflation, full-employment

(ideal) level of GDP for this economy is $800 billion, then what change in aggregate demand

(spending) is needed to reach full employment without inflation?

A.increase aggregate spending by $80 billion

B.decrease aggregate spending by $80 billion

C.decrease aggregate spending by $20 billion

D.increase aggregate spending by $20 billion

Suppose the economy is currently producing $650 billion GDP and the no inflation, full

employment level of production is $610 billion and the MPC = 3/4. If businesses decrease

investment spending by $5 billion this will

A.eliminate the recessionary gap that exists and bring the economy to the no inflation, full

employment level of output.

B.lessen the size of the recessionary gap that exists, but there will still be a recessionary gap.

C.lessen the size of the inflationary gap that exists, but there will still be an inflationary gap.

D.eliminate the inflationary gap that exists and bring the economy to the no inflation, full

employment level of output.

If an increase in aggregate demand results in no increase in real output (production) or employment, we can surmise that

A.the economy is in a deep recession.

B.the MPC equals 1.

C.the price level has fallen.

D.the economy is already operating at full employment.

Which of the following is a key feature of Keynesian economics?

A.Supply creates its own demand.

B.The level of saving depends primarily on interest rates.

C.The level of investment depends solely on interest rates.

D.Macroeconomic equilibrium can occur at less than full employment.

If wages increase by 10% while worker productivity increases by 7%,

A.business profits can not increase.

B.cost-push inflation will most likely to occur.

C.demand-pull inflation will most likely to occur.

D.the aggregate level of saving must have increased

If the inventories of business firms rise above the desired levels, the business sector can beexpected

to do which of the following in the near future?

A.increase production.

B.decrease production.

C.continue producing the same amount of output.

D.hire additional workers.

At the equilibrium level of GDP

A.actual investment is zero.

B.unplanned changes in inventories are zero.

C.saving is greater than planned investment.

D.saving is less than planned investment.

The household sector would tend to decrease their consumption if there was

A.an increase in stock prices

B.a reduction in interest rates

C.the expectation that employment will decrease in the future.

D.the expectation that consumer prices will increase more rapidly in the future

5 The following data refers to the actual and expected deaths (according to the standard table A1967-70 ultimate) of a certain class of life assurance business in 1998-1999. age-group actual expected deaths deaths 45-50 8.611 10,031 50-55 14,187 16.140 55-60 16,767 19,426 60-65 16,453 18,797 65-70 6.095 7,056 70-75 5,514 6.427 Total 67.627 77,877 You wish to try a graduation by the formula -41967-70 where paler-70 refers to A1967-70 ultimate and o is an unknown parameter. (i) What is the M.L.E. of a? (ii) Test the goodness of fit of the resulting graduation. 6 The q-type mortality rates of a certain class of impaired lives are equal to those of a standard table, {q, }, plus an unknown constant, o. You are given data of the form {E,} and {0, } in respect of a group of these lives. Derive an equation whose solution is the maximum likelihood estimate of a.A general insurance company is debating introducing a new screening progranune to reduce the claim amounts that it needs to pay out. The programme consists of a much more detailed application form that takes longer for the new client department to process. The screening is applied to a test group of clients as a trial whilst other clients continue to ll in the old application form. It can be assumed that claim payments follow a normal distribution. The claim payments data for samples of the two groups of clients are [in 100 per year): (i) Test the hypothesis that the new screening programme reduces the mean claim amount. [5] (ii) Formally test the assumption of equal variances required in pan [i]. [3] [Total 3] An environmentalist is investigating the possibility that oestrogenic chemicals are leading to a particular type of deformity in a species of amphibians living in a lake. The usual proportion of deformed animals living in unpolluted water is 0.5%. In a sample of 1.000 animals examined. 15 were found to have deformities. [i] Test whether this provides evidence of lhe presence of harmful chemicals in the lake. [3] Following an extensive campaign to reduce these chemicals in the lake a further sample of 300 animals was examined and 10 were found to have deformities. [ii] Test whether there has been a signicant reduction in the proportion of deformed animals in the lake. [3] [Total :5]