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

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.

Question # 2

An autonomous rise in __________ note causes by a change in the price level aggregate output of the interest shifts the _________ curve to the

Question # 3

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.

Question # 4

Under a fixed exchange rate system an expansionary fiscal policy leads to a

Question # 5

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

Question # 6

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 # 7

There are ______ methods of measuring GDP

Question # 8

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

Question # 9

The rate of which central bank lends to commercial banks is known as

Question # 10

Which of the following would qualify as an aggregate supply shock.

Question # 11

Which of the following part of M1

Question # 12

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 # 13

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

Question # 14

An autonomous increase in money demand.

Question # 15

An increase in government spending causes the equilibrium level of aggregate output to_______ at any given interest rate and shifts the ____ curve to the

Question # 16

Money is

Question # 17

Employment tends to _______ whwn aggregate output.

Question # 18

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.

Question # 19

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

Question # 20

The IS curve shifts to the left when

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Sr. # Question Answer
1 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

2 A sale of bonds by the central bank should cause.

A. A fall in the interest rate

B. An increase in the money supply

C.A decrease in the reserves of the commercial banks

D. An increase in the commercial banks loans to the public

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

A. The money supply increaes

B. The money supply decreases

C.The money supply is unaffected

D. We cannot tell what will happen to the money supply

4 In an economy experience high interest rates and high unemployment The ISLM frame work predicts that _________ policy has been too.

A. fiscal ; expansionary

B. fiscal ; contractionary

C.monetary ; expansionary

D. monetary ; contractionary

5 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

6 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

7 You move some of your savings account balance into your checking account.

A. M2 falls and M1 rises

B. M1 falls and M2 rises

C.M1 and M2 are unchanged

D. M1 rises and M2 remains unchanged

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

A. Purchases ; decreases

B. sales ; decreases

C.purchases ; increases

D. sales ; increases

9 If there is a financial panic and increased uncertainty about the return in the stock market and bond market 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 its ambiguous

D. Money demand declines

10 The equilibrium level of income is.

A. Rs. 360

B. Rs.600

C.Rs.440

D. Rs.500

11 In the Keynesian cross diagram a decline 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. rise,; left

B. rise ;right

C.fall ; left

D. fall ; right

12 There are _______ major instrument of monetary policy.

A. Three

B. Four

C.Five

D. None

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

A. An increase in interest rates, a risen investment and a rise in GDP

B. An increase in interest rates a drop in investment and a drop in GDP

C.A decrease in interest rtes a rise in investment and a rise in GDP

D. A decrease in interesr rates a drop in investment and a drop in GDP

14 A bonds becomes a riskier asset the demand for money_______ and all else constant, the equilibrium interest rate

A. Rises ; rises

B. rises ; falls

C.falls ; rises

D. falls ; falls

15 An increase in autonomous consumer expenditure causes the equilibrium levelof 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

16 The investment demand curve shows the relationship between the levels of.

A. Investment and consumption

B. Consumption and Interest rate

C.Investment and interest rate

D. None

17 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.

18 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

19 According to the Laffer curve as tax rates increase tax revenues.

A. Decrease continuously.

B. Initially decrease and then increase

C.Rise continuously

D. Initially increase and then decrease

20 How do the banks gain from this corporate behavior.

A. More loans can be made

B. Tax free profits can be made

C.Interest rates can be increased

D. By circumvent banking regulations

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