ECO403 Final Term MCQs 2026 by VUBuddy

Q1. The ---------aggregate supply curve is ----------- at the full-employment level.

1. Long-run; vertical
2. Long-run; horizontal
3. Short run; convex
4. Short run; steeper

Correct answer: Long-run; vertical

Q2. Investment causes the capital stock to------------ while depreciation causes capital stock to ----------------

1. Fall; fall.
2. Rise; rise.
3. Fall; rise.
4. Rise; fall.

Correct answer: Rise; fall.

Q3. In the Solow growth model with technological growth,Y/L =y * E shows----------per worker.

1. Technology
2. Capital
3. Output
4. Labor

Correct answer: Output

Q4. A graph of all combinations of income (Y) and interest rate (r) that results in goods market equilibrium is called:

1. IS curve
2. LM curve
3. Money demand curve
4. Money supply curve

Correct answer: IS curve

Q5. In the IS-LM model, --------------in government purchases can shift ---------curve to the left.

1. A decrease; LM
2. An increase; IS
3. An increase; LM
4. A decrease; IS

Correct answer: A decrease; IS

Q6. In the Solow growth model with technological growth rate,y = Y/ (L×E) shows-----------per effective worker.

1. Labor
2. Output
3. Technology
4. Capital

Correct answer: Output

Q7. In the Solow growth model with technological growth rate, L × E shows the number of effective--------

1. Output per worker.
2. Workers.
3. Saving per worker.
4. Capital per worker.

Correct answer: Workers.

Q8. In the short run equilibrium, if output is ---------------- level, then prices will rise.

1. At the natural rate of unemployment
2. At the full employment
3. Below the full employment
4. Above the full employment

Correct answer: Above the full employment

Q9. "Change in consumer confidence" is an example of:

1. IS Shock
2. Supply Shock
3. LM Shock
4. Production Shock

Correct answer: IS Shock

Q10. In Solow model; production functions shows labor augmenting technological progress. Y is equal to:

1. F (K+1, L + K)
2. F (K+1, L+1 + E+1)
3. F (K, L x E)
4. F (K, L + E)

Correct answer: F (K, L x E)

Q1. In economics a -------- is an ----------event that affects an economy either positively or negatively.

1. Debt; unexpected
2. Debt; expected
3. Shock; expected
4. Shock; unexpected

Correct answer: Shock; unexpected

Q2. An increase in the ---------shifts the aggregate demand (AD) curve to the ---------.

1. Money supply; left
2. Price level; right
3. Money supply; right
4. Tax rate; right

Correct answer: Money supply; right

Q3. If marginal propensity to consume (MPC) is 0.7, the government purchases multiplier is----------

1. 1/0.3.
2. 1-0.7/-0.7.
3. 1/0.7.
4. 0.7/0.7.

Correct answer: 1/0.3.

Q4. Investment causes the capital stock to rise while ------------ causes capital stock to fall.

1. Discount rate
2. Inflation
3. Deflation
4. Depreciation

Correct answer: Depreciation

Q5. Under Mundell Fleming model a small open economy with a floating exchange rate, monetary expansion does all of the following EXCEPT:

1. Increase the exchange rate.
2. Increase the equilibrium income level.
3. Decrease the exchange rate.
4. Cause net exports to rise.

Correct answer: Decrease the exchange rate.

Q6. Which of the following is an example of fiscal policy that will increase aggregate demand?

1. A tax cut.
2. A cut in government expenditure.
3. A cut in discount rate.
4. An increase in discount rate.

Correct answer: A tax cut.