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

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

Question # 2

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 # 3

The Central Bank controls money and credit with the exception of.

Question # 4

Believers in the monetarist rule assert that

Question # 5

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

Question # 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.

Question # 7

If the money supply change was correctly and fully anticipated for a change of M to MI new classical macroeconomics under the assumption of rational expectations would predict a movement from.

Question # 8

Why do people keep currency in their pockets when bank deposits pay interest.

Question # 9

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

Question # 10

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 # 11

In the ISLM framework an expansionary monetary policy causes aggregate output to _____________ and the interest rate to

Question # 12

A sale of bonds by the central bank should cause.

Question # 13

Suppose velocity is constant and the real income elasticity of the demand for money is less than one then estimating inflation as money growth rate minus real growth rate.

Question # 14

The opportunity cost of holding currency decreases when.

Question # 15

Monetary policy can affect output.

Question # 16

How much of the Rs.5 billion dollar increase in government expenditures will be recouped in taxes.

Question # 17

Which of the following causes M1 demand is decrease.

Question # 18

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 # 19

Automatic stabilizers

Question # 20

A business cycle refers to.

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PPSC Economics Chapter 4 Important MCQ's

Sr.# Question Answer
1 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
2 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
3 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
4 Which of the following would qualify as an aggregate supply shock.
A. An unexpected increase in oil prices
B. Seasonally expected increase in oil prices
C. An unexpected reduction in consumer confidence
D. an anticipated tax cut
5 An increase in spending those results from expansionary _______ policy cause the interest rate to.
A. fiscal ; rise
B. fiscal ; fall
C. incomes ; rise
D. income ; fall
6 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
7 The parable of Riding a Switchback suggests that stabilizing policy.
A. Is not sufficiently stimulating or contra citing the economy at any time
B. Is desirable
C. Is effective
D. Is stimulating or contracting the economy at the wrong times.
8 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
9 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.
10 The ratio of debt to GDP will be larger
A. The lower the real interest rate
B. The lower the growth rate of output
C. The lower the in initial debt ratio
D. The lower the ratio of the primary deficit to GDP

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