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

An increase in expected inflation is likely ot cause.

Question # 2

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

Question # 3

Employment tends to _______ whwn aggregate output.

Question # 4

In the Keynesian cross diagram, an expenditure causes the aggregate demand function to shift _________ and the equilibrium level of aggregate output to.

Question # 5

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

Question # 6

If the Bank of Pakistan wished to pursue an expansionary monetary policy it would.

Question # 7

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

Question # 8

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 # 9

"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.

Question # 10

An example of nondiscretionary fiscal policy would be.

Question # 11

The quantity of money demanded increases with income Thus if income increases the opportunity cost of holding money demand and re establish equilibrium in the money market This relation is captured by.

Question # 12

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 # 13

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

Question # 14

A reduction in government spending causes the equilibrium level of aggregate output to ___________ at any given interest rate and shifts the ________ curve to the.

Question # 15

an asset that can easily be exchanged for goods and services is called a.

Question # 16

The purpose of financial intermediaries is.

Question # 17

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

Question # 18

Which of the following part of M1

Question # 19

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

Question # 20

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

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Sr.# Question Answer
1 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
2 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
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 A change in the money supply has a greater effect upon equilibrium income.
A. The more interest sensitive private sector spending is.
B. The less interest sensitive private sector spending is.
C. The smaller the expenditure multiplier is
D. The more interest sensitive money holdings are to the rate of interest.
5 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
6 According to the supply side model a reduction in the tax rate.
A. Could reduce the size of any budget deficit
B. Would have no effect on output
C. Would have no effect on consumption
D. None of the above
7 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
8 You know that all taxes are distortionary under what conditions will this knowledge lead you to appose the imposition of every single tax in the economy.
A. If you live in a 1st best world.
B. If you live in a 2nd best world
C. If the tax rates on some of the items are prohibitively high
D. Either of the above
9 The idea that the money supply should change to accommodate changes in aggregate demand is associated with the ideas of.
A. Milton Friedman
B. Ronald reagan
C. Margaret Thatcher
D. John Maynard Keynes
10 An example of discretionary fiscal policy would be.
A. The operation of the welfare sate
B. The operation of the processive federal income tax
C. A tax cut adopted to stimulate consumption
D. An interest rate out in plummeted to stimulate consumption
11 " A growing number of economists view the Fed's new willingness to take on more of the nation's debt as inflationary in the long run." This inflation worry is because.
A. The government may tax less
B. The debt may become excessive
C. The government may spend more
D. The money supply may increase excessively
12 As the interest sensitivity of money demand increases
A. The multiplier term increases
B. Fiscal policy has a greater effect on output
C. Monetary policy has a smaller effect on output
D. All of the above
13 If Federal reserve conducts open market sales, the money supply ___ shifting the LM curve to the_____
A. decreases ; right
B. decreases ; left
C. Increases ; right
D. Increase ; left
14 The quantity of money demanded increases with income Thus if income increases the opportunity cost of holding money demand and re establish equilibrium in the money market This relation is captured by.
A. An upward stopping LM curve
B. A downward sloping L curve
C. A downward sloping IS curve
D. The circular flow of money in the economy.
15 The purpose of fiscal policy is to
A. Alter the direction of the economy
B. Change people's attitudes toward governemnt
C. Educate people as to the importance of economics
D. Offer insight into the way thing work
16 Automatic stabilizers
A. Counter balance fluctuations in economic activity.
B. Reinforce fluctuations in economic activity
C. Do not occur when the economy falls into recession
D. Reduces the size of the deflationary gap
17 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.
A. up ; left
B. up ; right
C. down ; left
D. down ; right
18 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
19 Money's primary role in the economy comes from the benefits of lowering transactions costs and allowing specialization This function of money is called.
A. Store of value
B. Medium of exchange
C. Standard of deferred payment
D. Unit of account
20 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

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