Macro

[tim]

Cn someone tally answers with me ?

2001
Q.Witg a horizontal LM curve and a downward sloping IS curve , if govt exp increases by Rs.1000 and is financed by an increase in lump sum taxes, with a MPC= 0.8 income increases by
a). 5000
b). 1000
c). 4000
d). 1200

ans - A

1999
Q. wih income on horizontal axis and int rate on the vertical axis, an increase in autonomous saving will
a) shift lm curve to left, raisiing int rates and lowering income
b) shift IS curve to left, lowering int rates and lowering income
c) shift IS curve to right , raising the int rates and raising income
d) shift LM curve to right ,lowering int rates and raising income

ans - C

2006
Q. An incr in ooil prices shifts the phillips curve and ...... the natural rate of unemployment. if the govt wants to keep the economy at the original rat of umemploy, it must have ......inflation.
a) lowers, ever incraesing
b) raises, ever decreasing
c) raises, ever increasing
d) doesnt change, ever increasing

ans - C

Pls confirm d answers...

[tim]

pls somebody confirm d answers

[s]

hey in 1 answer i was thinking it should be 1000..a horizontal LM means there will be no crowding out at all..moreover
 Del Y= cDelY-cDelT + DelG and there is no change in real r..
or Del Y= (1-c) Del G/(1-c)= Del G........Del G=Del T

so Y rises by 1000

2. C
3. C

[tim]

oh ya u r ryt...

[tim]

and for d 3 questn...the answer is given as doesnt change...but my answr differs frm it...

[divyas]

how are u doing Q.2.
im getting B

wen savings increase there wud b a fall in the level of income (AD= C=I+G WALA CURVE wil shift downwards and hence income falls ), a fall in income leads to a fall in money dd ---> IR falls
this goes only wid option B
bt hw wud the IS curve shift?
im nt gettig that

hope this makes some sense

[tim]

if we consider what is saved is invested and then we see...we will option c..this is how i did...

[komal]

@tim : firstly, increase in autonomous saving does not mean that investment has increased by same amount, u should not make this assumption,
seconly even if u assume that whatever is now saved is invested then , as consumpption will decrease by the same amount, then there should be no change in IS curve.
Answer should be b

[mukund sharma]

yes the answer for the Q1 should be thousand and not 5000, becoz the govt exp is financed through the taxes