Question # 1

"The impact on this monetary aggregate of extensive finance innovation -the changes in the kinds of deposits and services offered by banks led the central bank to drop M1 as a n intermediate target with the changes in the way the public was holding payments balances the M1 aggregate no longer that the same reliable link to.

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Tax rates

The money supply

Aggregate demand

Government spending

An increase in autonomous consumer expenditure causes the equilibrium levelof aggregate output to _______ at any given interest rate and shifts the ____ curve to the

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rise ; LM ;right

rise ; IS ; right

fall ; LM, Left

rise ; IS ; Left

In the ISLM framework an expansionary monetary policy causes aggregate output to _____________ and the interest rate to

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increase ; increase

Increase ; decrease

decrease ; decrease

decrease ; increase

A tax cut __ disposable income _____ consumption expenditure and shifts the IS curve to the.

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Increases ; increases ; right

Increases ; decreases ; left

decreases ; increases ; left

decreases ; decreases ; right

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

Which of the following events will lead to a decrease in the demand for money.

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An increase in the level of aggregate output.

A decrease in the supply of money

A decrease in the interest rate

a decrease in the price level

The budget deficit tends to decrease when

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GDP increases

GDP decreases rapidly

GDP remains unchanged

GDP decreases slightly

How do the banks gain from this corporate behavior.

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More loans can be made

Tax free profits can be made

Interest rates can be increased

By circumvent banking regulations

The idea that the money supply should change to accommodate changes in aggregate demand is associated with the ideas of.

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Milton Friedman

Ronald reagan

Margaret Thatcher

John Maynard Keynes

The increase in base money divided by the corresponding induced increasing commercial bank deposits is the.

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Bank's line of credit

Reserve ratio

Current ratio

Money multipiler

If the State bank of Pakistan wished to pursue a light monetary policy it would.

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Lower the required reserve ratio and the statutory liquidity ratio.

Lower interest rates

Buy government securities on the open market

Sell government securities on the open market

In the ISLM frame work a contractionary fiscal policy causes aggregate output to ___________ and the interest rate to

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Increase ; increase

Increase ; decrease

decrees ; decrease

decrease ;Increase

Disposable income is obtained by subtracting ________ taxes from personal income

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Indirect taxes

Direct taxes

Subsidies

None

You move some of your savings account balance into your checking account.

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M2 falls and M1 rises

M1 falls and M2 rises

M1 and M2 are unchanged

M1 rises and M2 remains unchanged

A decrease in the quantity of money supplied shifts the money supply curve to the _____ and the LM curve to the

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right ; left

right ; right

left ; left

left ; right

Which of the following would qualify as an aggregate demand shocks.

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An unexpected increase in oil prices

A seasonally expected increase in oil prices

An unexpected reduction in consumer confidence

an anticipated tax cut

During periods of negative demand shocks deficit target reductions such as those mandated in the Gramm Rudman Hollings Act would tend to.

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Stimulate the economy and increase empolyment.

Result in additional recessionary declines in employment and income

Stimulator defiance spending

Have an automatic stabilizing impact upon the economy

The parable of Riding a Switchback suggests that stabilizing policy.

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Is not sufficiently stimulating or contra citing the economy at any time

Is desirable

Is effective

Is stimulating or contracting the economy at the wrong times.

Which school of economic thought suggested that one possible cause of inflation was a push from the cost side.

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New classical economists

Monetarists

Marxists

Keynesians

A decrease in fully autonomous investment other things equal shifts the ______ curve to the

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IS ; right

IS ; Left

LM ; Left

LM ; right

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

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