Question # 1

The quantity theory of money allows monetarists to obtain a number of economics predictions by assuming a constant.

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Velocity of money

Nominal output

Overall price level

Stock of money

Employment tends to _______ whwn aggregate output.

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rise, falls

rise ; rises

falls; rises

Not change ; falls

Believers in the monetarist rule assert that

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Lags are long and variable

the economy cna be stabilized by automatic mechanisms

The central bank should keep the money supply growth constant

All of the above

A bank has excess liquidity reserves to lend but is unable to find a willing borrower these will_______ the size of the money multiplier.

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Reduce

Increase

Have no effect on

Double

According to the Laffer curve as tax rates increase tax revenues.

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Decrease continuously.

Initially decrease and then increase

Rise continuously

Initially increase and then decrease

In the ISLM frame work an expansionary fiscal policy causes aggregate output to _________ and the interest rate to.

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increases ; increase

increases ; decrease

decreases ; decreases

decreases ; increses

Despite an expansionary monetary policy an economy experiences a recession the recession could occur in spite of the right ward shift of the LM curve if

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The IS curve shifts left ward

The IS curve shifts right ward

The money supply increase

Taxes are cut

Given fixed exchange rates assume Pakistan initiates contractionary monetary ad fiscal policies to combat inflation. these policies will also.

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Reduce a balance of payments surplus

Reduce a balance of payments deficit

Increases both imports and exports

Decrease both imports and exports

An increases 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

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 real money demand doubles while the nominal money supply is unchanged what happens to the price level.

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The price level increase by a factor of four

The price level doubles

The price level is unchanged

The price level falls by one half.

Suppose you are a monetarist and believe in the the monetarist rule which the monetary authorities appear to be following if the economy beings to experience a slight increase in the inflation rte you would recommend that the monetary autorities.

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Increase the money growth rate slightly

Decrease the money growth rate slightly

Leave the money supply growth unchanged

Enact a one time slight decrease in the money supply

The quantity of money demanded increases with income Thus if income increases the opportunity cost of holding money demand and re establish equilibrium in the money market This relation is captured by.

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An upward stopping LM curve

A downward sloping L curve

A downward sloping IS curve

The circular flow of money in the economy.

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.

In the Keynesian cross diagram an increasing investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to rise and the IS curve to shift to the

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up ; right

up ; left

down ;left

down ; right

There are ______ methods of measuring GDP

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Three

Four

Five

None

The IMF is an agency charged with providing.

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Technical assistance to stock market and financial market problems.

Loans for post World War II reconstruction

Short term credit for international balance of payments deficits

Bonds denominated in U.S. dollars as a loan to LDCs

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 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

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

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

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