Macroeconomics 2

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RMIT UNIVERSITY

FACULTY OF BUSINESS

SCHOOL OF ECONOMICS AND FINANCE

SIM SEMESTER 1: 2012

ECON-1045 Macroeconomics 2

TEST 2 (MOCK)

Instructions:

1.Fill in your name and other details on page 2 before beginning the test. DO NOT DETACH PAGE 2 FROM THE QUESTION SHEETS.

2.You must answer all twenty eight questions in the time allowed for the test (Note: In the actual test, there are only 20 questions!)

3.For each question, choose the most appropriate answer and write the corresponding letter in the appropriate box on page 2.

4.You may do any working out on the question sheets.

5.On completion hand the test paper with attached answer sheets back to your lecturer.

6.Remember to fill in your name and other details on page 2 before beginning the test.

SIM ECON-1045 MACROECONOMICS 2 SEM 1: 2012 TEST 2 (MOCK)

Name:

Student Number:

Course:

|QUESTION |ANSWER |QUESTION |ANSWER | |1 | |15 | | |2 | |16 | | |3 | |17 | | |4 | |18 | | |5 | |19 | | |6 | |20 | | |7 | |21 | | |8 | |22 | | |9 | |23 | | |10 | |24 | | |11 | |25 | | |12 | |26 | | |13 | |27 | | |14 | |28 | |

ANSWER ALL QUESTIONS.

1. The term “DEFLATIONARY IMPOTENCE” refers to the
a. Inability or failure of a fall in the price level to raise the level of output. b. Failure of fiscal policy to drive prices down in a recession. c. Problems that an economy faces when industries are not perfectly competitive and prices do not fluctuate. d. Failure of firms to lower prices even when wages are falling.

2. The term “MONETARY IMPOTENCE” refers to the
a. Inability or failure of an increase in money supply to change interest rate levels. b. Failure of the Central Bank to increase nominal money supply. c. Problems that apply when the economy faces a relatively inelastic, if not totally, vertical LM curve. d. Failure of fiscal or budgetary policy to drive down prices during a recession.

3. If the Pigou (or Real Balance) effect is present, then the slope or gradient a. Of the aggregate demand curve is zero; the aggregate supply curve is vertical. b. Of the aggregate supply curve is zero; the aggregate demand curve is vertical. c. Of the AD cannot be vertical; the aggregate supply curve is unaffected. d. Of both the AD and AS curves are vertical.

4. The Pigou (or Real Balance) effect may not be large if the a. Expectations effect characterises or reflects buying behaviour. b. Liquidity effect characterises or reflects buying behaviour. c. Redistribution effect decreases total consumption expenditures. d. Both a and c are correct.

5. If the price level is fixed, a recession will...
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