Question No. 1 5 are based on the following information from the national income accounts (in $) for a hypothetical economyGDP6000

Gross Investment800

Net Investment200

Consumption4000

Government Purchases of Goods and Services1100

Government Budget Surplus30

1. NDP is (a) 5400(b) 5300(c) 5900(d) None of the above2. Net Export is (a) 100(b) 70(c) 130(d) 7003. Government Tax is(a) 1130(b) 1080(c) 300(d) None of the above4. Private Savings(a) 2000(b) 900(c) 870(d) 19705. National Savings(a) 2000(b) 900(c) 870(d) 1970

6. A decrease in the money supply will shift the IS curve(a) To the right(b) To the left(c) Only slope will be changed, No shift in the IS Curve(d) None of the above

7. A decrease in the tax rate will shift the LM curve (a) To the right(b) To the left(c) Only slope will be changed, No Shift in the LM Curve(d) None of the aboveQuestion No. 8 and 9 are based on the following specificationThe following equations describe an economy. (Think of C,I,G, etc. as being measured in billions and r as a percentage; a 5 percent interest rate implies r =5)C = 0.8(1-t)Y, t= 0.25, I = 900-50r, = 800L = 0.25Y - 62.5r, = 5008. What is the equilibrium level of income (a) 3500(b) 46736.25(c) 6500(d) None of the above

9. What is the equilibrium level of interest rate?(a) 11.33(b) 6(c) 18(d) None of the above

10. In IS- LM model the effectiveness of expansionary fiscal policy(a) Increases with the increase in the interest sensitivity of money demand(b) Decreases with the increase in the interest sensitivity of money demand(c) is maximum if money demand function is perfectly interest elastic(d) Both (a) and (c)

11. In IS- LM model the effectiveness of expansionary monetary policy(a) Increases with the increase in the interest sensitivity of money demand(b) Decreases with the increase in the interest sensitivity of money demand(c) is maximum if money demand function is perfectly interest elastic(d) Both (a) and (c)

12. In IS- LM model the effectiveness of expansionary monetary policy(a) Increases if the investment demand is more interest sensitive(b) Increases if the investment demand is less interest sensitive(c) Not changes with the interest sensitivity of investment demand(d) None of the above

13. In IS- LM model the effectiveness of expansionary fiscal policy(a) Increases if the investment demand is more interest sensitive(b) Increases if the investment demand is less interest sensitive(c) Not changes with the interest sensitivity of investment demand(d) None of the above

14. In IS LM model with the increase in G(a) Interest rates increases less if the investment demand is more interest sensitive(b) Interest rates increases more if the investment demand is more interest sensitive(c) Interest rates increases less if the investment demand is less interest sensitive(d) Both (b) and (c)

15. Impact of fiscal policy will be greater if (a) Money supply is a positive function of rate of interest(b) Money supply is a negative function of rate of interest(c) Not dependent on functional form of money supply(d) None of the above

16. The crowding-out effect implies that an increase in G (holding taxes constant) would lead to all of the following EXCEPT:

a) A decrease (leftward shift) in money demand.b) An increase in the real rate of interest.c) A decrease in investment spending.d) An offset to the initial increase in aggregate demand.

17. Other things being equal, a reduction in the money supply will lead to a

a. Rise in the rate of interest and no change in investment expenditureb. Fall in the rate of interest and an increase in investment expenditurec. Rise in the rate of interest and a decrease in investment expenditured. Rise in the rate of interest and in increase in investment expenditure