Intermediate Macroeconomics II: Policy Issues — DU B.A (Prog.) Economics as Major Previous Year Question Papers

1. Time inconsistency leads to : A. Perfect policy credibility B. Policy irrelevance C. Loss of trust in policymakers D. Stable inflation 2. In the Taylor Rule, if inflation rises above target while output is at potential, the central bank should: A. Reduce interest rates 8 Keep interest rates c`onstant C. Increase interest rates D. Increase government spending 3`. W_h.ich condition ensures debt sustainability in the long run? A. Real interest rate > GDp growth rate 8.. Real interest ,rateL< GPp growth. rate C. Persistent primary.deficit -` D. Increasing budget deficit 4. Ricardian Equivalence.impli~esl`that-a.tax c`ut financed by borrowing will: A. ` Increase consuription ` 8. Decrease savings C. Have no effect on aggregate demand D. incre-a`se,investment `? `` 5. The Is-PC-MR model is primarily used to analyze: A. Long-run economic growth 8. Trade.cycles only C. Short-run macroeconomic stabilization and monetary policy D. Population dynamics 6. The real exchange rate (RER) is best defined as: A. 8. C. D. The price of one currency in terms of another The price of domestic goods relative to pric,e of foreign goods The rate fixed by the central bank The difference between exports and imports 7. A real appreciation of domestic currency leads to:. A. Higher exports and lower.iinport§ 8. Lower exports and higher imports C. No change in trade balance D. Increase in capital flows only 8. Under flexible exchange rates, monetary expansion causes: A. Currency appreciation C. No change in exchange rate D. Increase in imports 9. The J-curve effect refers to: A. Continuous decline in trade balance 8. Immediate improvement in trade balance C. Initial worsening followed by improvement D. No effect of depreciation 10. Wage-price spiral occurs when: A. Prices fall continuously B. Wages and price level increase by time lag C. Imports decrease D. Exchange rate stabilizes 11. Hysteresis in exchange rates implies: A. Temporary effects of exchange rate changes B. No impact on trade - C. Permanent effects of lasting exchange rate changes on trade pattern D. Immediate adjustment 12. Sterilization refers to: A. Increasing exports B. Neutralizing forex intervention through open market operations. D. Capital inflow 13. Exchange rate overshooting refers to: A. Exchange rate remains constant B. Exchange rate changes more than the long-run equilibrium C. Exchange rate falls permanently D. Exchange rate does not change 14. Purchasing power parity (PPP) States that:, , A. Exchange rates are fixed 8. Exchange rates reflect interest rates C. Exchange rates adjust to price level differences D. Exchange rates depend only on trade .15. The Portfolio Ba.lance Model. focuses on: A. Goods market only 8. Money supply only C. Financial asset markets D. Trade balance only 1., Discuss the shift in monetary p'6^licy from money supply targeting to inflation targetin8. Evaluate the effectiveness of monetary and fiscal policies in responding to the Global Financial Crisis of 2008.