MCQ

1. Adam Smith's idea of the 'invisible hands' says that given a country's resources and its initial distribution of wealth, the use of markets will:

a.insulate a nation from the effects of political instability

b.will eliminate social problems such as crime.

c.eliminate inequalities between the rich and the poor.

d.make people as economically well off as possible.

e.make people not as economically well off as possible.

2. Suppose there is a simultaneous fiscal expansion and monetary contraction.We know with certainty that:

a. output will increase.

b. output will decrease.

c. the interest rate will increase.

d. the interest rate will decrease.

e. both output and the interest rate will increase.

3.Suppose there is a simultaneous central bank purchase of bonds and increase in taxes. We know with certainty that this combination of policies must cause:

a.an increase in the interest rate (i)

b.a reduction in i

c.an increase in output (Y)

d.a reduction in Y

4. An increase in consumer confidence will tend to cause which of the following to occur?

a.a rightward shift in the IS curve

b.a leftward shift in the IS curve

c.an upward shift in the LM curve

d.a downward shift in the LM curve

5. In the wage setting relation W = PeF(u,z), the variable z does NOT include which of the following variables?

a. the minimum wage.

b. unemployment benefits.

c. the extent to which firms mark up prices over their marginal cost.

d. all of the above.

e. none of the above.

6. Labor productivity is represented by which of the following?

a. the ratio of output to employment.

b. workers per unit of capital.

c. capital per worker.

d. the ratio of output to population.

e. the ratio of output to the labor force.

7. The price setting equation is represented by the following: P = (1+m)W.When there is perfect competition, we know that m will equal:

a. W

b. P

c. 1

d. W/P

e. none of the above

8.Suppose the actual unemployment rate increases.This will cause:

a.an upward shift in the WS curve

b.a downward shift in the WS curve

c.an upward shift in the PS curve

d.a movement along the WS and the PS curves

e. none of the above

9.Suppose the aggregate production function is given by the following: Y = AN.Given this information, we know that labor productivity is represented by the following:

a.1/A

b.A

c.1/N

d.N/Y

10.Suppose the aggregate production function is given by the following: Y = N.Given this information, we know that labor productivity is represented by the following:

a.1/N

b.N

c.N/Y

d.1