Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Economics (CFA520): - Question Paper

Assuming that the investment is autonomous and increases by 1,000 MUC during the year, the income
in the economy increases by
(2 marks)
(a) 625 MUC
(b) 2,500 MUC
(c) 3,000 MUC
(d) 4,000 MUC
(e) 5,000 MUC.
< ans
>
45. The consumption function for a 2 sector economy is C = 1,800 + 0.5Y and investment is an
autonomous component. If equilibrium income is 4,400 MUC, what is the investment in the economy?
(1 mark)
(a) 2,600 MUC
(b) 200 MUC
(c) 400 MUC
(d) 2,650 MUC
(e) 7,200 MUC.
< ans
>
46. The ‘investment multiplier’ explains the change in national product due to change in
(1 mark)
(a) Consumption expenditure
(b) Investment expenditure
(c) Government expenditure
(d) Export
(e) Import.
< ans
>
47. The IS function and LM function in an economy are estimated to be Y = 4,800 + 0.5Y – 50i and Y =
4,600+ 400i respectively. The investment function in the economy is 1,600 – 100i. If the government
spending increases by 200 MUC, which of the subsequent is actual about the interest rate in the
economy?
(2 marks)
(a) Increases from 10.00% to 10.50%
(b) Increases from 10.00% to 10.25%
(c) Increases from 10.00% to 12.00%
(d) Increases from 10.00% to 15.00%
(e) Increases from 10.00% to 10.80%.
< ans
>
48. Which of the subsequent shift the LM curve to the right?
I. Increase in money supply.
II. Purchase of bonds by the RBI.
III. reduce in the price level.
(1 mark)
(a) Only (I) above
(b) Only (II) above
(c) Both (I) and (II) above
(d) Both (II) and (III) above
(e) All (I), (II) and (III) above.
< ans
>
49. The IS function and LM function of an economy are estimated to be Y = 2,860 + 0.5Y – 60i and Y =
2,600 + 400i respectively. The investment function in the economy is 800 – 50i. If the government
wants to increase the output by 10% by raising the government expenditure, what is the crowding out in

Earning:   Approval pending.