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 Federal reserve conducts open market __ the money supply __ shifting LM curve to the left.

Question # 2

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

Question # 3

As the required reserve ratio is decreased the money multiplier.

Question # 4

If a perfectly competitive industry is in long run equilibrium all firms will

Question # 5

At any given level of the interest rate expectations are likely to be___________ optimistic and planned investment is likely to be ______ when _________ is growing rapidly than when it is growing slowly or falling.

Question # 6

The situation in which the imports are greater than exports is termed as.

Question # 7

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

Question # 8

Per Capita income is obtained by dividing National income by

Question # 9

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

Question # 10

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

Question # 11

The relation between M2 and inflation is tighter than the relation between M1 and inflation because.

Question # 12

An increase in spending those results from expansionary _______ policy cause the interest rate to.

Question # 13

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 # 14

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 # 15

An increase in expected inflation is likely ot cause.

Question # 16

A shift in tastes toward Pakistan goods ______ net exports and causes the quantity of aggregate output demanded to______

Question # 17

Over time the wealth of society increases and payments technologies get more efficient What is the effect on money demand of these two changes.

Question # 18

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

Question # 19

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

Question # 20

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.

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Sr.# Question Answer
1 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.
2 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
A. The IS curve shifts left ward
B. The IS curve shifts right ward
C. The money supply increase
D. Taxes are cut
3 Total utility of a commodity is measured by which price of that commodity.
A. Value in use.
B. Value in exchange
C. Both of above
D. None of above
4 Time lags which often erode effectiveness of monetary and fiscal policy measures represent.
A. The change in export and import price.
B. Delays in the response of the economy to stabilization policy.
C. The foreign response to price changes
D. The change in exchang erates
5 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.
6 "A monetary rule need not mean a single baid number If the central bank fears velocity shifts rules could be adopted for adjusting the target in the face of a trends change in velocity "If velocity were trending upward the target money growth rate would be adjusted.
A. Upward
B. Down ward
C. To be zero
D. To match inflation
7 A major advantage of monetary over fiscal policy is that monetary policty.
A. Can be put into effect more quickly
B. Affects all sectors of the economy equally
C. Authorities are quicker to see the need for policy
D. Has a more direct and predictable impact on spending.
8 "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.
A. Income growth
B. Unemployment
C. Money growth
D. Taxes
9 If the original money supply is MSo and the original demand for money is MDo then
A. The equilibrium interest rate and savings are 5% and 50
B. The money supply is 200 and equilibrium income is 500
C. The equilibrium interest rate and income are 5% and 600
D. The speculative demand is 25
10 When a nations money supply is Rs.1200 billion and the nominal Gros National product is Rs.4800 billion the velocity of money is.
A. 0.25
B. 4
C. 0.4
D. Rs.4 billion
11 What is the significance of underestimating transactions money.
A. Monetary policy will be over simulating the economy
B. Monetary policy will be putting a drag on the economy
C. there is a need for money that the central bank should be meating.
D. The economy has too much money and there frore not enough spending.
12 in the Keynesian cross diagram, a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift _____the equilibrium level of aggregate output to fall and the IS curve to shift to the.
A. up ; left
B. up ; right
C. down ; left
D. down ; right
13 A decline in the money supply shifts the LM curve to the left causing the interest rate to ________ and output to___
A. rise ; rise
B. rise ; fall
C. fall ; rise
D. fall ; fall
14 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
15 In the Keynesian cross diagram a decrease in investment spending because companies become more pessimistic about investment profitability causes the aggregate demand function to shift ______ and the equilibrium level of aggregate output to ______
A. up ; rise
B. up ; fall
C. down ;rise
D. down ; fall
16 A decrease in autonomous consumer expenditure causes the equilibrium level of aggregate output to __________ at any given interest rate and shifts the ___ curve to the __________
A. rise ; LM ;right
B. rise ; IS ; right
C. Fall ; LM ; left
D. rise ;IS; Left
17 During period of inflation
A. Those people who have fixed incomes benefit
B. Every one's real income falls
C. those people who enter long term wage agreements benefit
D. Those people whose real income rises faster than the general price level benefit
18 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
19 A decrease iin money demand other thing equal shifts the _____ curve to the
A. IS ; right
B. Is ; Left
C. LM ; Left
D. LM ; Rfight
20 An autonomous decline in the value of the Pakistan Rupee makes Pakistan goods _______ relative to foreign goods and results in a ______ in net exports.
A. Cheaper ; decline
B. Cheaper ; rise
C. dearer ; decline
D. dearer ; rise

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