1.

According to Okun's Law, a 1% increase of unemployment rate results in a loss

of GDP of how many percentage points?

Correct Answer: 2 - You were incorrect ( 48% got it correct )

Okun's Law is named after Arthur Okun who discovered that unemployment rate
and GDP are negatively correlated.
2. What is the alternative name for Consumer Price Index (CPI)?

Correct Answer: Laspeyres Index - You were correct. ( 32% got it correct )
CPI or Lapeyres Index uses fixed weights on price of various goods. CPI measures
the price of the commodities that is bought by domestic consumers. Thus, CPI
indexes vary between countries because different countries have different
consumer needs, tastes and priorities, and thus form different 'national shopping
baskets'.
3. What exactly is the Fisher Effect?

Correct Answer: A one for one relation between inflation and the nominal interest
rate - You were incorrect ( 31% got it correct )
Thus a 1% increase in inflation rate results in a 1% increase in nominal interest
rate.
4. If an economy uses a floating exchange rate system then what will happen to
GDP if the government decided to use expansionary fiscal policy? (Assuming
capital mobility is perfect)

Correct Answer: No change - You were incorrect ( 22% got it correct )

Since expansionary fiscal policy causes the exchange rate to appreciate, this
means imports will increase which results in a fall in GDP. This offsets the
increase in GDP caused by the expansionary fiscal policy.
5. What theory explains why deflation may actually lead to an increase in GDP?

Correct Answer: Pigou Effect - You were incorrect ( 33% got it correct )
According to Pigou Effect, a fall in prices leads to increase in real money balances
causing consumer to spend more, when we spend more other people earn more,
this never-ending cycle will eventually leads to an increase in GDP.
6. Who introduced the concept of 'Permanent Income Hypothesis'?

Correct Answer: Milton Friedman - You were incorrect ( 44% got it correct )

He believes that transitory income and permanent income forms our present
income. Transitory income represents the proportion of income which is not
considered to be permanent and may change in the foreseeable future.
7. The higher the independence of the central bank from government
intervention, the higher the inflation.

Correct Answer: f - You were incorrect ( 63% got it correct )

Countries like Switzerland and Canada has lower inflation due to a greater
independence of their central bank.
8. The 'Quantity Equation' can be expressed as MV=PY, from this what is the
other form of expression for real money balances?

Correct Answer: kY - You were incorrect ( 30% got it correct )

By rearranging MV=PY, real money balances (M/P) becomes (M/P)=kY where
k=(1/V)
9. Ad valorem tariffs are a fixed charge on per unit of good imported from
overseas.

Correct Answer: f - You were incorrect ( 43% got it correct )

Ad Valorem tariffs are charged as a proportion of the value of imported goods.
10. In what year was the WTO (World Trade Organisation) created?

Correct Answer: 1995 - You were incorrect ( 26% got it correct )

Before WTO, GATT (General Agreement on Tariffs and Trade) was the official
agreement of free trade between countries but it's not an organisation.