Economics A2 MCQS! Need help!!!

[Sijan92]

Hello, I am having problems in some of the Eco MCQs of A2. Will be very glad if anyone helps me out here.
I am posting some of the mcqs here. Try to help me out in all of them or at least the ones you can solve.

Oct/Nov paper 31 2010=

18 According to monetarist theory, what will be the short-run and the long-run effect of an
unexpected increase in the money supply on the real wage level?
short-run long-run
A decrease increase
B decrease unchanged
C unchanged increase
D unchanged unchanged

why is the answer B here????

20 In a closed economy with no government
the full employment level of income = $400 billion
and the equilibrium level of income = $380 billion.
If the deflationary gap is $4 billion, what is the marginal propensity to consume?
A 1/5
B 1/4
C 3/4
D 4/5

Why is the answer D here??

22 An increase in the money supply leads to a fall in interest rates. What else will decrease as a
result of these changes?
A the desire to hold idle money balances
B the price of equities
C the price of government bonds
D the velocity of circulation of money

Why is the answer D here??

24 Which feature of the Indian economy could explain why the purchasing power parity exchange
rate of the Rupee is much higher than its market exchange rate?
A high levels of duty on imported goods
B high levels of rural unemployment
C the relatively low price of goods not traded internationally
D the relatively low rate of inflation

Why is the answer C here??


Oct/Nov 09 paper 32 =

Q9. (Sorry couldn't post the question here as it contained a diagram)

Why is the answer D here?

Q15. (Sorry couldn't post the question here as it contained a diagram)

Why is the answer C here?

Q20. (Sorry couldn't post the question here as it contained a diagram)

Why is the answer C here??

Thank you very much. Cheers!

 

[Qamar Baloch]

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[aamir9010]

Here is the explanation FREE OF CHARGE.

1. Refer to the phillips curve. According to it, there will be a fall in real wages because firms and unions are not prepared for an increase in inflation. but in the long run, unions will press for higher wages and the wage rate will be back to normal. the answer is B

2. The explaination here refers to the multiplier. k=1/mps. therefore
400-380=20. 4/20 is the mps. 1-mps is equal to the mpc. Therefore 4/5 is the answer or 0.8.

3. When interest rates falls borrowings increases which means consumption will increase, which will increase the amount of money in the economy. multiplier.

4. Im not sure but it refers to terms of trade.

 

[Qamar Baloch]

Hi Sejan92: You may send you request on [email protected] to get your problems solved by Qamar Baloch.

 

[Sijan92]

Here is the explanation FREE OF CHARGE.

1. Refer to the phillips curve. According to it, there will be a fall in real wages because firms and unions are not prepared for an increase in inflation. but in the long run, unions will press for higher wages and the wage rate will be back to normal. the answer is B

2. The explaination here refers to the multiplier. k=1/mps. therefore
400-380=20. 4/20 is the mps. 1-mps is equal to the mpc. Therefore 4/5 is the answer or 0.8.

Here is the explanation FREE OF CHARGE.

1. Refer to the phillips curve. According to it, there will be a fall in real wages because firms and unions are not prepared for an increase in inflation. but in the long run, unions will press for higher wages and the wage rate will be back to normal. the answer is B

2. The explaination here refers to the multiplier. k=1/mps. therefore
400-380=20. 4/20 is the mps. 1-mps is equal to the mpc. Therefore 4/5 is the answer or 0.8.

3. When interest rates falls borrowings increases which means consumption will increase, which will increase the amount of money in the economy. multiplier.

4. Im not sure but it refers to terms of trade.

Thanks for helping!

I still have some doubts though.

4. Why is mps= 4/20? The formula for mps is change in saving/change in income. How does that relate here?

5. Why will increase in the amount of money will lead to decrease in velocity of circulation of money?
3. When interest rates falls borrowings increases which means consumption will increase, which will increase the amount of money in the economy. multiplier.

4. Im not sure but it refers to terms of trade.

 

[aamir9010]

4. The formulae for mps is right but here you have to use the multiplier formulae. i.e. k=1/mps. therfore since there is no government the only withdrawal is savings. So 1-mps is equal to marginal propencity to consume.

5. Velocity of circulation is the amount of times money changes hands. therefore an increase in money supply will be an increase in velocity.