NOUN TMA Questions and Answers: ECO718 - Macro-Economic Theory I Contd.

Q21 What is required to address a deflationary economy?

Policies that can shift AD upwards

Q22 What can be done to remove an economy from an inflationary gap?

Policies that move AD downwa rds

Q23 What is another name for deflationary gap in a full employment position

Recessionary gap

Q24 When aggregate demand falls short of aggregate supply at the full employment equilibrium position it is known as__________

Deflationary gap

Q25 What do you understand by an inflationary gap?

Aggregate demand is more than aggregate suppl y

Q26 Which of these concepts can be used to explain full employment equilibrium, less than full employment equilibrium, more than full employment equilibrium?

Inflationary and deflationary gaps

Q27 The concept of multiplier analysis the_______ effect of change in leakage or injection an equilibrium level of income


Q28 How many factors apart from real interest rate determine induced investment

1 0

Q29 In the withdraw-injection approach equilibrium is achieved when is equal to ________i.e. when what is withdrawn is offset by what is injected

Planned savings is equal to planned invest ment

Q30 What are variables that can be considered as injection into the income- expenditure stream.

Investment expenditure and inco me from exports

Q31 In the withdraw 􀳦??injection approach some of the variables that take away from the income expenditure stream include____

Savings, imports and taxation

Q32 An equilibrium in the Keynesian model is when___________________


Q33 A country􀳦??s net national product is the value of all goods and services produced by the citizens of a country minus__________

Depreciation or capital con sumption

Q34 Gross domestic product is the value final output produce in economy regardless of __________ of produce, where as cross national product is the value of goods and services produced by the ____________ of country.

Nationa lity and citizenry of a country

Q35 The classical economist believed in minimal or zero___________ intervention in business activities , the Keynesian believed in intervention during troughs that the supply needs a bail out and the only way out was for_______ to be involved in the economic activities.

Governmen t

Q36 Keynes who did not automatically tend towards full employment believed that the resulting under employment could be curved by _____ or ______prices.

Fixed or monetary

Q37 The classical believed that supply (aggregate production) determines _____ and ______

Income and full employ ment

Q38 According to Say􀳦??s law, supply creates it own demand as prices move to balance______ and_________

Demand an d aggregate supply

Q39 The classical economy thought believed that individual self interest and ________ determine prices and rewards for factors of____________

Competition and p roduction

Q40 The models for aggregate expenditure include the following except___

An island economy

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