Questions:
INSTRUCTIONS TO STUDENTS
• Answer ANY 6 out of the following 8 questions.
• State whether the statement is TRUE or FALSE, but circling the right option.
• Provide a succinct explanation for each of your answer in the space provided.
• Each question is marked out of 2.5 marks; 0.5 for correctly stating TURE or FALSE and 2
marks for the explanation.
1. In the base year, nominal GDP is equal to real GDP. TRUE / FALSE
2. Labour force participation rate measures the precent of population who are employed.
TRUE / FALSE
3. Quality change bias in CPI arises because goods cost the same and quality is constant.
TRUE / FALSE
4. The demand for loanable funds depends on the nominal interest rate. TRUE / FALSE
5. In the short run, an increase in money supply leads to a decrease in nominal interest rate. TRUE / FALSE
6. In the short run, equilibrium output can be less than the potential GDP. TRUE / FALSE
7. Aggregate planned expenditure includes only autonomous components. TRUE / FALSE
8. A shift in aggregate demand leads to an increase in real GDP in the long run. TRUE / FALSE