Question 1

During the mid-1980s, we observed a significant reduction in oil prices. In Australia, we would expect that this drop in oil pices would cause:

Question 2

The IS curve will NOT shift when which of the following occurs?

Question 3

Suppose the central bank decides it wishes to raise the interest rate (i). To do so, it will have to:

Question 4

The four components of national income are

Question 5

Suppose the private sector only hold currency (i.e. there are no banks). The demand for money is given by
Money demand = $Y(0.4 - i)
The nominal income is $100 and the supply of money is held fixed at 25. Starting from the initial equilibrium suppose nominal income increases to $125. The increase in income will ________ the demand for money and the new equilibrium interest rate will be ________ .

Question 6

Suppose there is a simultaneous tax cut and open market sale of bonds. Which of the following must occur as a result of this?

Question 7

In the national income accounts, all of the following are classified as government purchases except:

Question 8

Suppose the public only hold currency (i.e. there are no banks). The demand for money is given by
Money demand = $Y(0.4 - i)
The nominal income is $100 and interest rate is held fixed by the central bank at 10% (or 0.1). Starting from the initial equilibrium suppose nominal income increases to $125. The increase in income will require the central bank to increase the supply of money from ________ to ________ .

Question 9

Based on our understanding of the IS-LM model with the central bank holding the interest rate constant, we know that a tax cut:

Question 10

Use the following information to answer the question below.
C = 1000 + .8(Y-T)
I = 800
G = 2000
T = 1000
The equation for household saving, S, for the above economy is:

Question 11

Based on our understanding of the IS-LM model with the central bank holding the money supply constant, we know that a tax cut:

Question 12

A reduction in income will cause:

Question 13

The IS curve will shift when which of the following occurs?

Question 14

Which of the following expenditure items is NOT included in fixed investment spending (I)?

Question 15

Suppose a bond offers to pay $1000 in one year and currently sells for $900. Given this information, we know that the interest rate on the bond is:

Question 16

If nominal GDP rises from $100 billion to $120 billion, while the GDP deflator rises from 2.0 to 2.2, the percentage change in real GDP is:

Question 17

Use the following information to answer the question below.
C = 1000 + .8(Y-T)
I = 800
G = 1800
T = 1000
The equilibrium level of GDP for the above economy equals:

Question 18

Suppose that for the year 2005, a company spends $20 million on intermediate goods and $40 million on wages, with no other expenses. Also assume that its total sales are $90 million. The value added by this company is:

Question 19

Suppose there is a policy mix of contractionary monetary policy and expansionary fiscal policy. This combination of policies must cause:

Question 20

Assume that computers and oil are the only good produced in an economy.
In 2004, 40 computers and 10,000 litres of oil were produced. Computer prices in 2004 were $1500 while price of oil was $2 per litre.
In 2005, computer production went up to 80 but its price fell to $500. Oil production increased to 12,000 litres and its price increased to $5 per litre.
The values of nominal GDP in 2004 and 2005 are