Real Sector & Aggregate Demand
Which of the following is one of the main shortcomings of the Hodrick Prescott (HP) Filter used to calculate the output gap:
a- it assumes a constant potential output growth
b- it does not reflect economic and behavioral relationships
c- it is very complex and data-intense
d- the smoothness parameter cannot be changed
b- it does not reflect economic and behavioral relationships
If the economy is in recession, the cyclically adjusted primary fiscal balance is most likely to be:
a- Less than the actual primary balance
b- Higher than the actual primary balance
b- Higher than the actual primary balance
Which of the following factors would be a source of credit risk in the financial sector?
a- Banks have low capital adequacy ratios
b- Banks make loans to highly-leveraged firms
b- Banks make loans to highly-leveraged firms
When assessing exchange rate misalignment, if the current account gap is negative, the real exchange rate is:
a- In equilibrium
b- Is sustainable
c- Is overvalued
d- Is undervalued
c- Is overvalued
All else being equal, a shift to the right n the aggregate demand curve can arise from:
a- A decrease in the money supply
b- A decline in imports
c- A decrease in government consumption
d- An increase in oil prices for an oil importer
b- A decline in imports
A country's initial public debt/GDP is 70 percent. Assume that its annual real interest rate equals 5 percent, the real GDP growth rate equals 3% and the primary fiscal balance equals -2% of GDP. What would happen to the ratio of public debt to GDP over time:
a- It will remain stable at 70% of GDP
b- It will converge to zero
c- It will increase without bound
d- It will stabilize at a value higher than 70% of GDP
c- It will increase without bound
Tightening monetary policy combined with a very high share of external short-term debt on bank's balance sheets is likely to lead to:
a- A financial crisis only
b- A sovereign debt crisis only
c- financial and currency crises
d- financial and sovereign debt crises
c- financial and currency crises
Assume that the real exchange rate is at its equilibrium level (zero CA gap). Everything else being equal, what would be the impact of an contractionary fiscal policy on the CA gap:
a- It will become positive
b- It will become negative
c- It will become zero
d- It will not change
a- It will become positive
What is the contribution of TFP to GDP growth (according to Solow Decomposition), if:
- GDP growth is 4%
- Employment growth is 2%
- growth in physical capital stock is 1%
- the share of labor income in GDP is 50%
2.5%
Year 1: CAB = -2
Year 2: CAB = -1.5
The Fiscal policy is:
a- Less expansionary
b- more expansionary
c- less contractionary
d- more contractionary
a- Less expansionary
In the formulation of monetary policy rules, how does a strict inflation-targeting (IT) rule differ from a Taylor rule?
a- An IT rule is more credible than a Taylor rule
b- An IT rule ignores the neutral policy rate level
c- An IT rule requires a flexible exchange rate
d- An IT rule puts zero weight on the output gap
d- An IT rule puts zero weight on the output gap
A country has a current account deficit of the BOP of 3% of GDP. Knowing that public sector saving rate is 2% of GDP and public investment rate is 6% of GDP, what is the saving-investment balance of the private sector?
1% of GDP