Question # 1

In economics money refers to

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Income

Wealth

Assets use and accepted an payment

Currency

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

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

A decline in the money__________ shifts the LM curve to the ____ causing the interest rate to rise and output to fall.

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Demand ; right

demand ; left

supply ; right

supply ; left

The implementation lag for monetary policy is generally

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Much longer than it is for fiscal policy

Unrelated to central bank action

The same as it is for fiscal policy

Much shorter than it is for fiscal policy.

Commercial banks

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Are financial intermediaries that offer demand deposits.

Are owned by the Federal Reserve

Are non profit banking institutions

Are overseen by the Federal savings and loan insurance corporation.

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.

When a nations money supply is Rs.1200 billion and the nominal Gros National product is Rs.4800 billion the velocity of money is.

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0.25

4

0.4

Rs.4 billion

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

One of money's primary roles in the economy comes from the use of money to transfer purchasing power to the future This role of money is called.

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store of value

Unit of account

Medium of exchange

Standard of deferred payment

A decline in taxes __ consumer expenditure and shifts the _ curve shifts to the.

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Raises ; LM; Right

Lowers; IS ; left

raises ; IS; right

Lower ; LM; left

What happens to the money supply if the deficit is financed by selling bonds to the central bank.

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The money supply increases

The money supply decreases

The money supply is unaffected

We cannot tell what will happen to the money supply

Automatic stabilizers

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Counter balance fluctuations in economic activity.

Reinforce fluctuations in economic activity

Do not occur when the economy falls into recession

Reduces the size of the deflationary gap

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

The limit of an economy's total productive capacity at any given time is set by

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The amount of money in circulation

Business demand for goods and services

The level of government spending and taxation

the quantity and quality of its productive resources

Why would corporations want to achieve zero balances in their checking accounts.

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To earn more interest

To avoid paying taxes

to keep a low profile

To circumvent banking regulations

If the Central Bank wanted to decrease the quantity of money held by the public it would.

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Sell government securities

Buy government securities

Lower the legal reserve requirement

Raise taxes

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

Those who favor setting the target rate of inflation at about 3% believe.

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The cost of moderate inflation can be minimized by indexing the tax system and bonds

that the cost of going to 0% is very low

That moderate inflation increases money illusion

Believe that moderate inflation aggravates the time inconsistency problem

During the early years of the Great depression there was a significant decrees n the the money supply that causes. the ______ to shift____

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IS ; Leftward

IS ; rightwards

LM ; Leftward

LM ; rightward

The function of money do not include.

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an exchange of purchasing power

A unit of account

A medium of exchange

A store of value

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