In the IS-LM model, if the government decides to cut transfer payments,

Question 7 options:

1)the interest rate will decrease while income tax revenue will increase.

2)the interest rate and the level of consumption will both decrease.

3)the government budget deficit will decrease and the level of output will increase.

4)the interest rate will decrease while personal saving will increase.

Suppose the Phillips curve in an economy is. The monetary policy rule aims for an annual nominal money supply growth rate of 3%, which is equal to the growth rate of the price level of aggregate output. If the natural rate of unemployment is 5%, last period inflation is 2% and expectations are formed adaptively, what is the unemployment in this period?

Question 9 options:

1)1%

2)3%

3)6%

4)5%

The production technology in an economy is characterised by the production function,, whereY,K, andLrepresent output, capital stock and population, respectively. Given a population growth rate = 0.02; a savings rate = 0.1 and a depreciation rate = 0.03, what is the steady statelevel

andgrowth rateofoutput per capita?

Question 10 options:

1)Steady state level = 2, growth rate = 0.

2)Steady state level = 1.8, growth rate = 0.

3)Steady state level = 0, growth rate = 0.9.

4)Steady state level = 1.67, growth rate = 0.02.