Economics MCQs

Page No. 226

According to the Phillips curve unemployment will return to the natural rate when ?


aNominal wages are equal to expected wages


bReal wages are back at equilibrium level


cNominal wages are growing faster than inflation


d Inflation is higher than the growth of nominal wages



Menu costs in relation to inflation refers to ?


aCosts of finding better rates of return


bCosts of altering price lists


cCosts of money increasing its value


dCosts of revaluing the currency



An increase in costs will ?


aShift aggregate demand


b Shift aggregate supply


cReduce the natural rate of unemployment


dIncrease the productivity of employees



An increase in injections into the economy may lead to ?


aAn outward shift of aggregate demand- and demand-pull inflation


b An outward shift of aggregate demand and cost push inflation


cAn outward shift of aggregate supply and demand-pull inflation


dAn outward shift of aggregate supply and cost push inflation



Demand pull inflation may be caused by ?


aAn increase in costs


bA reduction in interest rate


cA reduction in government spending


dAn outward shift in aggregate supply



If borrowers and lenders agree on a nominal interest rate and inflation turns out to be less than they had expected ?


aneither borrowers nor lenders will gain because the nominal interest rate has been fixed by contract


b None of these answers


cborrowers will gain at the expense of lenders


dlenders will gain at the expense of borrowers



Under which of the following conditions would you prefer to be the lender ?


aThe nominal rate of interest is 15 percent and the inflation rate is 14 percent


bThe nominal rate of interest is 20 percent and the inflation rate is 25 percent


cThe nominal rate of interest is 12 percent and the inflation rate is 9 percent


dThe nominal rate of interest is 5 percent and the inflation rate are 1 percent



If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is ?


a4 percent


b10 percent


c -4 percent


d21 percent


View Answer 4 percent

Refer to Figure 24-1 What is the value of the basket in the base year ?


aRs459.25


bRs418.75


cRs300


dNone of these


View Answer Rs300

The “basket” on which the CPI is based is composed of ?


a consumer production


bProducts purchased by the typical consumer


c total current production


dnone of these answers



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