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

Weighted monetary aggregates

Question # 2

A decrease in the quantity of money supplied shifts the money supply curve to the________ and the equilibrium interest rate

Question # 3

An increase in autonomous consumer expenditure causes the equilibrium levelof aggregate output to _______ at any given interest rate and shifts the ____ curve to the

Question # 4

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

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

Equilibrium in the money markets can be expressed by the equation i = 9k/h) Y -M/h. The slope of LM decrease when

Question # 7

When your grandmother keeps her savings hidden under her mattress she is using money as.

Question # 8

A state of government bonds by the central bank should cause

Question # 9

A Political problem with discretionary fiscal policy is the.

Question # 10

Other things equal a decrease in autonomous consumption shifts the _____ curve to the

Question # 11

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

Question # 12

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

Question # 13

What happens to the money supply if the deficit is financed by selling bonds to the general public.

Question # 14

A rise in planned investment spending unrelated to the interest rate causes teh equilibrium level of aggregate output to __________ at shifts the _____ curve to the _______

Question # 15

A monetary action consistent with the central bank selling bonds in the open market would be.

Question # 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 __________

Question # 17

The money multiplier is 4, and the money creating potential of the banking system is Rs. 40,000,000. The legal reserve ratio and the excess reserves are.

Question # 18

The idea that the money supply should change to accommodate changes in aggregate demand is associated with the ideas of.

Question # 19

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

Question # 20

What technical terminology do economists use to refer to how much the money will multiply as this process unfolds.

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Sr.# Question Answer
1 In the 1930s, when Keynes was alive a expansionary fiscal policy taking everything else constant would have led to.
A. A relative large increase in Y, a smaller increate n P
B. A relative large increase in P, a smaller increase in Y
C. Both Y and P increasing with an percentage
D. Only Y increase
2 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
3 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.
A. IS ;right
B. IS ;Left
C. LM ; Left
D. LM ; Right
4 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
5 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
A. up ; right
B. up ; left
C. down ;left
D. down ; right
6 "The earlier predictions underestimated currency in circulation and treasury balances at the Fed, both of which drained reserves from the banking system" Lower reserves means.
A. Lower interest rates
B. Lower money supply
C. Lower unemployment
D. Higher inflation
7 According to classical models, the level of employment is determined primarily by
A. The level of aggregate demand for goods and services
B. Prices and wages
C. Government taxation
D. Government spending
8 "Although he didn't say so, this may ultimately compet the central bank to resort increasingly to managing the money supply by managing banks excess cash reserves the stuff from which the banks create loans". How would the central bank manages these excess reserves.
A. By buying bonds
B. By selling bonds
C. By changing reserve requirements
D. All of the above
9 When the central Bank ________ the money supply the LM curve shifts to the _______ interest rates ____________ and equilibrium aggregate output.
A. Increase ; right ; fall; increase
B. increases ; left ; rise ; decrease
C. decreases ; left ;rise ; increases
D. decreases ; left ; fall ; increases
10 Under a fixed exchange rate system an expansionary fiscal policy leads to a
A. Trade account deficit and a capital account surplus.
B. Trade account deficit and a capital account deficit
C. Trade account surplus and a capital account surplus
D. Trade account surplus and a capital accoundt deficit
11 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.
12 By financial crowding our economists mean
A. What the government borrows cannot be used for private investment
B. Government borrowing drives up interest rates.
C. Bank of England controls on commercial bank lending
D. Credit rationing
13 Fiscal policy refers to.
A. The actions of the central bank in controlling the money supply
B. The government's altitude to taxation
C. The spending and taxing policies used by the government to influence the economy
D. The governments regulation of financial intermediaries.
14 In the Keynesian corss diagram, and cline in autonomous consumer expenditure causes the aggregate demand function to shift down the equilibrium level of aggregate output to___________ and the IS curve to shift to the.
A. up ; left
B. up ; right
C. down ; left
D. down ; right
15 Which of the following is not an important variable in growth accounting calculations.
A. Productivity growth
B. Money supply growth
C. Labor growth
D. Capital growth
16 If the demand for money increase relative to the supply of money
A. Interest rates will trend upward
B. Interest rates will trend downward
C. Interest rates are not affected by increases in money demand
D. Interest rates will behave randomly
17 In the Keynesian cross diagram, an expenditure 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
18 When a government prints money to finance its expenditures it is likely to cause
A. Unemployment
B. Inflation
C. Deflation
D. Reductions in the use of barter
19 A tax cut __ disposable income _____ consumption expenditure and shifts the IS curve to the.
A. Increases ; increases ; right
B. Increases ; decreases ; left
C. decreases ; increases ; left
D. decreases ; decreases ; right
20 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 ______l and the IS curve Curve to shift to the.
A. rise ; left
B. rise ; right
C. fall ; left
D. fall ; right

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