Question # 1

The equilibrium level of income is.

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Rs. 360

Rs.600

Rs.440

Rs.500

Time lags which often erode effectiveness of monetary and fiscal policy measures represent.

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The change in export and import price.

Delays in the response of the economy to stabilization policy.

The foreign response to price changes

The change in exchang erates

In the case of an expansionary ___ policy the interest rate rise while in the case of an expansionary _______ policy the interest rate falls.

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monetary ; monetary

monetary ; fiscal

fiscal ; monetary

fiscal ; fiscal

The investment demand curve shows the relationship between the levels of.

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Investment and consumption

Consumption and Interest rate

Investment and interest rate

None

Other things equal a decrease in autonomous consumption shifts the _____ curve to the

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IS ; RIGHT

IS ; Left

LM ; Left

LF ; Right

Intermediate goods are meant for

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Direct use by the consumers

Further processing

The term do not exist

None

The use of money is more efficient than barter because the introduction of money

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Reduces the need for economic specialization

Reduces the need to exchange goods

Reduce the need for other stores of value

Reduces transaction costs

Knowledge of the money supply can lead to good predications of nominal GDP only

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If the price level is stable

If the money supply is stable

Over very short periods of time

If the determinants of velocity are known

The Central Bank controls money and credit with the exception of.

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Controlling the money base through open market operations

Controlling reserve requirements

Setting the discount rate of interest

controlling the stock market

The ratio of debt to GDP will be larger

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The lower the real interest rate

The lower the growth rate of output

The lower the in initial debt ratio

The lower the ratio of the primary deficit to GDP

If the Federal reserve conducts open market ________ the money supply _______ shifting the LM curve to the right.

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Purchases ; decreases

sales ; increases

purchases ; increases

sales ; decreases

If the money supply change was correctly and fully anticipated for a change of M to MI new classical macroeconomics under the assumption of rational expectations would predict a movement from.

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Pont Eo to point E1

Pont Eo to point E2

Pont Eo to point E3

Pont E3 to point E2

When the value of the Rupee rises Pakistan goods become _____ expensive relative to foreign goods which ___ exports.

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more ; iincreases

less ; increases

more ; decreases

more ; increases

Increasing the government budget deficit.

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Increases output in the long run

Decreases output in the short run

Decreases output in the long run.

Decreases the interest rate in the medium run.

A decrease iin money demand other thing equal shifts the _____ curve to the

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IS ; right

Is ; Left

LM ; Left

LM ; Rfight

The money multiple tells us teh ultimate increase in.

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The income level due to an increase in the money base

The money supply due to an increase in the money base.

The money supply due to an increase in the income level

The income level due to an increase in the money supply

When considering any kind of economics indicator, prices are important because.

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They reflect the value of goods and services.

They are established by the government to control population 's needs

They categorize goods and services by their weight

Historically they have proved to the good predictors of futures unemployment.

To move from point E to point E1 is consistent with.

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Expectations of a constant price level

Adaptive expectations that have no adjustment for the period immediately following a change in the actual price

Rational expectations and NCM

A and B

The relation between M2 and inflation is tighter than the relation between M1 and inflation because.

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M1 is larger than M2

The demand for M2 is more stable

M1 includes more liquid assets the M2

None of the above answers is correct.

A bonds becomes a riskier asset the demand for money_______ and all else constant, the equilibrium interest rate

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Rises ; rises

rises ; falls

falls ; rises

falls ; falls

The opportunity cost of holding currency decreases when.

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Income decreases

The interest rate on bonds decrease

Buying newly issued government bonds directly from the central bank

Buying newly issued government bonds directly to the central bank.

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