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Nilanjan Bhowmick AIR 3, CSIR NET (Earth Science)
- UGC NET
- Economics
Lt an economy is operating with significant unemployment, an increase 47. if an econ in which of the following will most likely cause employment to increase and
lt an economy is operating with significant unemployment, an increase 47. If an econ in which of the following will most likely cause employment to increase and interest rate to decrease ? (1 (2) Transfer payments (3) Government Expenditure (4) Purchase of govemment bonds by the Central Bank Increase in Reserve Requirement (1) (2) 8TTYT JI (3) (4) Which of the following is NOTa feature of New classical Economics? (1) (2) (3) It takes the assumption of adaptive expectations (4) 48. t believes that equilibrium is a normal state of affairs It is based on general equilibrium analysis (4) It talks about supply side business cycles. (1) 4 T HT FTHI HFIT (2) (3) (4)
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Nidhi taparia
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The correct answer for question 48 is option (3). This is because new classical economics assumes rational expectations, and not adaptive expectations.
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Nidhi taparia
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The correct answer of question 47 is Option (1). This is because when the central bank buys bonds in the market (what we often call Open Markets Operations or OMOs), it increases money supply in the market. As is obvious, with constant demand when supply rises, price falls. In this case the price being interest rate. So interest rate falls. But the impact on unemployment is not so straight forward. To put it in a simplistic manner, fall in interest rates makes credit cheaper. Investments rise, so does productive capacity. This might create more job opportunities and hence employment rises.
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Nidhi taparia
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