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ECS2602 EXAMINATION REVISION PACK 2024
ECS2602 EXAMINATION REVISION PACK 2024
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BMZ ACADEMYBMZ ACADEMY
@061 262 1185/068 053 8213
BMZ ACADEMY 061 262 1185/068 053 8213
CONTACT BMZ @>0612621185 068053 8213
, Which one of the following statements is correct?
The medium-run position in the IS-LM-PC model is a position where …
Select one:
A. only output is equal to the natural level of output, inflation is constant, and the real
interest rate is equal to the so-called "natural rate of interest".
B. only output is equal to the natural level of output, and unemployment is equal to the
natural rate of unemployment.
C. only output is equal to the natural level of output, and inflation is constant.
D. output is equal to the natural level of output, unemployment is equal to the natural rate of
unemployment, and inflation is constant. The real interest rate is equal to the so-called
"natural rate of interest".
Study the diagram below and answer the question.
Which one of the following statements is INCORRECT, as indicated by the arrows in the
diagram above?
Select one:
A. The economy moves away from the medium-run equilibrium position.
B. Expansionary monetary policy becomes ineffective, and the economy deteriorates.
C. The real policy rate is increasing, which leads to even lower demand and lower output,
lower output leads to higher inflation, and higher inflation leads to a higher real policy rate.
D. The real policy rate is increasing, which leads to even lower demand and lower output,
lower output leads to more deflation, and more deflation leads to a higher real policy rate.
In the IS-LM model for an open economy, monetary contraction implies the
…
Select one:
CONTACT BMZ @>0612621185 068053 8213
, A. nominal exchange rate increases leading to an increase in exports.
B. interest rate increases, the LM curve shifts upwards and the nominal exchange rate
increases.
C. interest rate decreases, the nominal exchange rate decreases and a depreciation of the
domestic currency takes place.
D. depreciation of the domestic currency takes place.
Which one of the following statements is correct?
A possible reason for the change in the exchange rate from R1 = $0.25 to
R1 = $0.30 could be …
Select one:
A. a decrease in the South African interest rate relative to that of the rest of the world.
B. an increase in the South African interest rate relative to the rest of the world.
C. a decrease in the demand for the domestic currency (rands).
D. an increase in exports.
Which one of the following statements is INCORRECT?
A. Using the interest parity equation and assuming that the expected exchange rate is
unchanged, a relationship between the domestic interest rate and the nominal exchange rate
can be derived.
B. The equilibrium condition in the financial market is where M = Md.
C. Financial investors, domestic or foreign, go for the highest expected rate of return.
D. A negative relationship exists between the domestic interest rate and the nominal
exchange rate.
In the IS-LM model for an open economy, an expansionary fiscal policy has
the following impact on the exchange rate, imports and exports:
Select one:
A. A decrease in the interest rate, which causes a capital outflow, a depreciation of the
exchange rate, an increase in exports and, possibly, an improvement of the trade balance.
B. An increase in the interest rate, which causes a capital inflow, an appreciation of the
exchange rate, a decrease in exports and, possibly, a deterioration of the trade balance.
C. An unchanged interest rate and, therefore, also an unchanged exchange rate. Exports will
be unchanged, but imports will decrease since the level of output and income increases.
D. An unchanged interest rate and, therefore, an unchanged exchange rate. Exports will be
unchanged, but imports will increase since the level of output and income increases.
Study the diagram below and answer the question.
CONTACT BMZ @>0612621185 068053 8213
, What happens to the following variables as the economy moves from a1 to a2 on the IS-LM-
PC model?Choose the INCORRECT statement.
Select one:
A. Consumption spending will increase.
B. Unemployment will be the same.
C. Investment spending will increase, and the demand for goods will increase.
D. Taxes will be the same.
Study the following diagram of Country Lombo and answer the question. The country
experiences an unacceptable budget deficit, and to deal with this budget deficit, the
government decides to increase taxes.
CONTACT BMZ @>0612621185 068053 8213
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