Question

1.Which of the following is true? ( ) A. When the unemployment rate is high, the participation rate must be high. B. The rate of unemployment tends to fall during expansions and rise during recessions. C. If the Japanese CPI is currently at 108 and the U.S. CPI is at 104, then the Japanese rate of inflation is higher than the U.S. rate of inflation.

3.Assuming that the quantity of money supply and the price level remain constant, the demand for money is a function of income and interest rate.If income increases, it will lead to( ) A.Demand for money goes up, interest rates go up. B.Money demand goes up, interest rates go down. C.Money demand goes down, interest rates go up.

4.IS the equilibrium income formed at the intersection of IS and LM curves equal to the national income of full employment? Why?

6.Suppose the following happened in a certain country : (a) a silver mining company paid $75,000 to mine 50 kilograms of silver for miners and sold it to a silver manufacturer for $100,000; (b) a silver manufacturer paid $50,000 to make a batch of necklaces for workers and sold them to consumers for $400,000. (1) GDP is calculated by using the final product production method; (2) how much value is produced in each production stage? GDP is measured in value-added terms (3) how much are the wages and profits earned in the production activities? GDP is measured by income.

7.Suppose the demand for money is L = 0.2y, the supply of money m = 200, c = 90+ 0.8yd, t = 50, I = 140-5 r, g = 50 (1) calculate IS and LM curves; Seek equilibrium income, interest rate and investment; (2) other things being equal, if g increases by $2 billion, what is the equilibrium income, interest rate and investment? (3) whether there is "extrusion effect".

Answer 1

PART-1) 1) Solution: False

Explanation: When the rate of unemployment if high, typically the rate of participation is low

2) Solution: True

Explanation: During recession, organisations are often forced to lay off employees; and have the financial ability to hire during expansion

3) Solution: False

The rate of inflation relates to the index change, one number cannot determine inflation rate

　

PART-2) Solution: Demand for money goes up, interest rates go up

Explanation: When income increases, the demand for money increases, which increases interest rates

　

I have answered first four MCQ's