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

Question # 2

What's the most common way for a central bank to reduce the money supply.

Question # 3

The function of money do not include.

Question # 4

An increase in expected inflation is likely ot cause.

Question # 5

In the case of an expansionary ___ policy the interest rate rise while in the case of an expansionary _______ policy the interest rate falls.

Question # 6

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

Question # 7

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

Question # 8

Net taxes are.

Question # 9

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 # 10

A change in the money supply has a greater effect upon equilibrium income.

Question # 11

Which school of economic thought suggested that one possible cause of inflation was a push from the cost side.

Question # 12

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

Question # 13

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

Question # 14

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

Question # 15

A Political problem with discretionary fiscal policy is the.

Question # 16

The increase in base money divided by the corresponding induced increasing commercial bank deposits is the.

Question # 17

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.

Question # 18

The central bank and the government are working against each other if as the government cuts taxes the central bank

Question # 19

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 # 20

In the ISLM frame work a contractionary fiscal policy causes aggregate output to ___________ and the interest rate to

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PPSC Economics Chapter 4 Important MCQ's

Sr.# Question Answer
1 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
2 Per Capita income is obtained by dividing National income by
A. Total labor Force in the country
B. Unemployed Youth in the country
C. Total population of that country
D. None
3 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
4 How much of the Rs.5 billion dollar increase in government expenditures will be recouped in taxes.
A. Rs.1 billion
B. Rs.2 billion
C. Rs.0.9 billion
D. Rs.0.5 billion
5 As the interest sensitivity of investment spending increase.
A. Monetary policy has a larger effect on output
B. Fiscal policy has a larger effect on output
C. The multiplier increases
D. All of the above
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 Factor that cause the IS curve to shift include.
A. Change in autocoups consumer spending
B. Change in taxes
C. Change in government spending
D. All of the above
8 "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.
A. Tax rates
B. The money supply
C. Aggregate demand
D. Government spending
9 in The Liquidity trap region
A. Fiscal policy is not effective
B. Monetary policy is completely ineffective
C. Monetary policy is completely effective
D. Fiscal policy and monetary policy are equally effective
10 A bank has excess liquidity reserves to lend but is unable to find a willing borrower these will_______ the size of the money multiplier.
A. Reduce
B. Increase
C. Have no effect on
D. Double

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