PPSC Economics Topic 4 MCQS Test Preparation

Punjab Public Service Commission, PPSC takes the competitive exam to offer the deserving candidates suitable positions in several governmental organizations. Candidates who are willing to apply for the coming PPSC examination session with the subject of Economics are advised to start their preparation as soon as possible. The reason behind this endorsement is that candidates with exceptional results secure suitable positions and the exceptional result is a result of exceptional preparation.

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

A state of government bonds by the central bank should cause

Question # 2

In the Keynesian cross diagram, an expenditure causes the aggregate demand function to shift _________ and the equilibrium level of aggregate output to.

Question # 3

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

Question # 4

An autonomous increase in the value of the domestic exchange rate.

Question # 5

In the ISLM framework the decreasing investment spending believed by Keynes to be the cause of the Great Depression would be illustrated by a shift of the ____ curve to the.

Question # 6

"Money deposited for a term is not left in bank vaults but is loaned out by the banks This means that is dollar on deposit can flow back into the banking system one or more times and that dollar can expand the money supply What cnterminlogy do economists use to refer to the proses described in this clip.

Question # 7

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

Question # 8

According to classical models, the level of employment is determined primarily by

Question # 9

As the interest sensitivity of investment spending increase.

Question # 10

A major advantage of monetary over fiscal policy is that monetary policty.

Question # 11

As a result of the increase in government expenditures disposable income increases by.

Question # 12

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

Question # 13

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

Question # 14

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

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

As the interest sensitivity of money demand increases

Question # 17

The near term effect of an unexpected sale of bonds by the central bank is.

Question # 18

Fiscal policy refers to the manipulation of government income and expenditure to.

Question # 19

"Rising productivity does not in itself spell the end of inflation. With enough______ it would still be possible to whip prices into a froth the blank is best filled with.

Question # 20

If the Bank of Pakistan wished to pursue a tight monetary policy is would.

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PPSC Chapter 4 Important MCQ's

Sr.# Question Answer
1 During periods of negative demand shocks deficit target reductions such as those mandated in the Gramm Rudman Hollings Act would tend to.
A. Stimulate the economy and increase empolyment.
B. Result in additional recessionary declines in employment and income
C. Stimulator defiance spending
D. Have an automatic stabilizing impact upon the economy
2 The rate of which central bank lends to commercial banks is known as
A. reserve rate
B. Discount rate
C. Open market operation
D. None
3 The quantity of money demanded varies
A. Directly with both prices and output
B. Inversely with both prices and output
C. Directly with prices and inversely with output
D. Inversely with prices and directly with output
4 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
5 An autonomous rise in __________ note causes by a change in the price level aggregate output of the interest shifts the _________ curve to the
A. Net exports LM right
B. Net exports LM left
C. Money demand IS right
D. Money demand LM left
6 "The problem with monetarism is that its advocates have seen it as infallible over short periods of time and wish it to be rigid in its application over all periods of time "The advocates of monetarism wish it to the rigid in its application over all periods of time to.
A. Weaken fiscal policy
B. Avoid monetary policy errors
C. Strengthen the impact of monetary policy
D. Ensure the independence of the central bank
7 By controlling the monetary base economists mean
A. Controlling the money multiplier
B. Restricting the amount of cash in circulation
C. Not allowing commercial banks to issue notes and coins
D. making banks keep a certain % of their assets as M0
8 Actual equilibrium is Rs. 1,500 billion and full employment is Rs. 2,500 MPC = 0.75 taxes are zero , and prices are adjustable To eliminate the observed deflationary gap , the government should.
A. Increase G by Rs.1,000
B. Decrease G by Rs.250
C. Increase G by less than Rs.100
D. Decrease G by more than Rs.250 but less than Rs.1000
9 What happens to the money supply if the deficit is financed by selling bonds to the central bank.
A. The money supply increases
B. The money supply decreases
C. The money supply is unaffected
D. We cannot tell what will happen to the money supply
10 Consider the five panels of the figure on the previous page in which panel would fiscal policy be the strongest.
A. Panel b
B. Panel c
C. Panel a
D. Panel d

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