Exam knowledge gaps

Question 1

In the IS-LM model with expectations, the Is curve is:

Answer 1

Much steeper

Question 2

To illustrate inflation inertia in the AS-AD model, The SRAS curve shifts upward because of increases in:

Answer 2

The expected price level

Question 3

To show inflation inertia in AS-AD model, the AD curve shifts upwards due to increases in:

Answer 3

The money supply

Question 4

The Ricardian view on fiscal policy makes less sense if people are:

Answer 4

Shortsighted and have static expectations

Question 5

Increasing money growth is shown by shifting the LM curve to the:

Answer 5

Right

Question 6

Increasing money growth can be shown by shifting the AD curve to the:

Answer 6

Right

Question 7

When the real wage is above the level that equilibrates supply and demand, then the Quantity of labour supplied is:

Answer 7

Greater than quantity of labour demanded

Question 8

During constant returns to scale, the output per worker will stay:

Answer 8

The same

Question 9

X% “Labour augmenting technological progress” if:

Answer 9

Economy grows by X% whilst the population stays the same

Question 10

In the basic endogenous growth model, if savings rate x A is greater than the depreciation rate, then income will grow:

Answer 10

Forever

Question 11

According to Romer, ideas are:

Answer 11

Rivalrous goods that vary in excludability `

Question 12

Mankiw, Romer and Well’s model is an example of a __ growth model

Answer 12

Exogenous

Question 13

According to the steady state solution in the MRW model, countries are rich because they:

Answer 13

• Have high physical capital investment rates
• Spend a lot of time accumulating skills
• Have low population growth rates
• Have high levels of technology

Question 14

The Solow residual is:

Answer 14

• Not directly observable

- Captures the change in output that isn’t captured by the model inputs

Question 15

Rational partisan theory assumes that:

Answer 15

Left wing parties are more willing to bear the cost of inflation if it lowers unemployment

Question 16

In the rational partisan model, the business cycle arises due to:

Answer 16

The uncertainty generated by competitive partisan politics

Question 17

When interest rates are at low low levels, this limits the extent to which:

Answer 17

Conventional monetary policy can be used to stimulate demand

Question 18

UK Quantitative easing has mainly entailed:

Answer 18

The BofE creating electronic money and purchasing long term government bonds predominantly from non-bank financial institutions

Question 19

The loss functions for each of the different scenarios take the shape of circles because:

Answer 19

The loss function is quadratic in inflation and output