PPSC Economics Topic 4 MCQS Test Preparation

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MCQ's Test For PPSC Economics Topic 4 Monetary & Fiscal Policy

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PPSC Economics Topic 4 Monetary & Fiscal Policy

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Question # 1

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

Question # 2

Tax incidence is the

Question # 3

An autonomous rise in the value of the Rupee makes Pakistan goods _____ expensive relative to foresight goods which ______ net exports

Question # 4

In the Keynesian corss diagra, an increase in autonomous consumer expenditure causes the aggregate demand function to shift up the equilibrium level of aggregate output to _______ and the IS curve to shift to the _______

Question # 5

How much of the Rs. 5 billion dollar increase in the government expenditures will be financed by bond sales.

Question # 6

According to Marshall the basis of consumer surplus is.

Question # 7

Consider the five panels of the figure on the previous page in which panel would fiscal policy be the strongest.

Question # 8

In economics money refers to

Question # 9

The negative effect on the economy that occurs when average tax rates increases because taxpayers have moved into higher income brackets during an expansion is.

Question # 10

In the Keynesian corss diagram, and cline in autonomous consumer expenditure causes the aggregate demand function to shift _____ the equilibrium level of aggregate output to fall, and the IS curve to shift to the.

Question # 11

In the Keynesian cross diagram, a decline in autonomous consumer expenditure causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to.

Question # 12

The aggregate demand curve is downward sloping because a higher price level.

Question # 13

a contractionary monetary policy

Question # 14

A shift in tastes toward foreign goods ______ net exports and causes the IS curve to shift to the

Question # 15

Following the work of _____________ in the 1960s, and the controversy associated with these views in the 1970s, there was a revival of interest by economists and government in monetary policy.

Question # 16

The quantity of money demanded varies

Question # 17

If the central Bank wished to Tighten money is would.

Question # 18

The equilibrium level of income is.

Question # 19

Factors that cause the IS curve to shift include.

Question # 20

Money's primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization This function of money is called.

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Sr. # Question Answer
1 The purpose of fiscal policy is to

A. Alter the direction of the economy

B. Change people's attitudes toward governemnt

C.Educate people as to the importance of economics

D. Offer insight into the way thing work

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

A. Purchases ; decreases

B. sales ; increases

C.purchases ; increases

D. sales ; decreases

3 Aggregate output and the interest rate are ______ related to government spending and are ___ related to taxes.

A. Positively ; positively

B. Positively ; negatively

C.negatively ; positively

D. negatively ; negatively

4 An example of nondiscretionary fiscal policy would be.

A. The operation of the welfare state

B. A Federal jobs program adopted to stimulate consumption

C.A tax cut adopted to stimulate consumption

D. An interest rate cut implemented to stimulate consumption

5 Intermediate goods are meant for

A. Direct use by the consumers

B. Further processing

C.The term do not exist

D. None

6 Fiscal policy is purposeful movements in _____designed to direct an economy

A. Interest rate

B. Legal structures

C.Government regulations

D. D Government spending and taxes

7 An increase in expected inflation is likely ot cause.

A. A decline in the demand for real balances

B. an increase in the demand for real balances.

C.No change i the demand for real balances

D. No change in the demand for real balances only of the income elasticity of real money demand is zero.

8 If the central bank prints more 10 billion and spends them then as a direct result of this action.

A. M1 and M2 both increases

B. Neighed M1 nor M2 increase

C.M1 increase but M2 does not

D. M2 increased but M1 does not.

9 Under system fixed exchange rates which of the following policies promotes internal balance for a nation.

A. Fiscal policy

B. Monetary policy

C.Both fiscal policy and monetary policy

D. Neither fiscal policy nor monetary policy

10 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.

A. store of value

B. Unit of account

C.Medium of exchange

D. Standard of deferred payment

11 Consider the five panels of the figure on the previous page in which of the five would monetary policy be the weakest.

A. Panel a

B. Panel d

C.Panel b

D. Panel e

12 A checking deposit held at a commercial bank is considered ______ of that bank.

A. An asset

B. Net worth

C.a liability

D. Capital

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

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

B. that the cost of going to 0% is very low

C.That moderate inflation increases money illusion

D. Believe that moderate inflation aggravates the time inconsistency problem

14 According to the supply side model a reduction in the tax rate.

A. Could reduce the size of any budget deficit

B. Would have no effect on output

C.Would have no effect on consumption

D. None of the above

15 As the interest sensitivity of money demand increases

A. The multiplier term increases

B. Fiscal policy has a greater effect on output

C.Monetary policy has a smaller effect on output

D. All of the above

16 The implementation lag for monetary policy is generally

A. Much longer than it is for fiscal policy

B. Unrelated to central bank action

C.The same as it is for fiscal policy

D. Much shorter than it is for fiscal policy.

17 In the Keynesian cross diagram, an increase in autonomous consumer function to shift _______ the equilibrium level of aggregate output to rise and the IS curve to shift to the.

A. up ; left

B. up ; right

C.down ; left

D. down ; right

18 A business cycle refers to.

A. Fluctuations in the general price level

B. changes in the long term growth pattern of the CPI

C.The ups and downs of real GDP

D. Fluctuations in the level of corporate.

19 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.

A. Increase the money growth rate slightly

B. Decrease the money growth rate slightly

C.Leave the money supply growth unchanged

D. Enact a one time slight decrease in the money supply

20 Suppose a new law imposes a tax on all trades of bonds and stock What is the likely effect on money demand.

A. Money demand declines first then rises when inflation increases

B. Money demand rises

C.The overall effect is ambiguous

D. Money demand declines

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